Reflections on New Trends in the Oil Market and China-Saudi Arabia Energy Cooperation

Abstract

President Xi Jinping defined energy cooperation as the ‘core of cooperation’ between China and Arab states, as he addressed the opening ceremony of China-Arab States Cooperation Forum (CASCF) Ministerial Meeting in 2014. 1 China and Saudi Arabia, respectively the world’s most important oil importer and exporter, recognise the pivotal status of energy cooperation in bilateral ties. In 2018, Saudi Arabia exported 61.2 million ton of oil (crude oil and oil products) to China, representing the second largest source of supply of China and 11.2% of China’s total oil imports, while China represented the largest oil export market, absorbing 14.4% of Saudi oil export of 2018. The bilateral investment has also started. Saudi Arabia has already constructed and is planning to construct five major petrochemical projects while China and Saudi Arabia have jointly constructed a refinery in Saudi Arabia. New trends are occurring in the global oil market. On the one hand, a tendency of long-term over-supply and low prices has emerged; on the other hand, the competition of oil supply is shifting to Asia. However, these market changes would not weaken China-Saudi energy cooperation. On the contrary, they give more reasons for both sides to strengthen cooperation, so as to address common challenges, especially to promote peace and stability of the Middle East, rationalisation of oil prices, diversification of oil trade denominated currencies, mutual investment in energy field and joint development of renewables. These trends have also indicated the direction for bilateral cooperation to address the challenges. It would be advisable for both countries to open up new prospects in energy cooperation based on the new concept of a community of energy security.