Gulf oil producers have spent this week strengthened ties with Asian consumers as international pressure mounts on Iran to discontinue its current nuclear program or face further sanctions.
While China is thought by analysts to be a prospective winner from any sanctions on Iranian oil sales, as a lack of competition for Iranian crude will allow Beijing to extract discounts from the Islamic Republic, its third biggest supplier. However, Chinese Premier Wen Jiaobo has been touring the gulf to try to seek increased security of supply from Saudi Arabia, which has the capacity to export just under half its production capacity through the Red Sea, avoiding the Strait of Hormuz which Iran has threatened to close.
“China and Saudi Arabia are both in important stages of development, and there are broad prospects for enhancing cooperation,” Wen Saturday told Saudi’s Prince Nayef, who is a senior member of the Saudi government, according to Chinese state news agency Xinhua.
“Both sides must strive together to expand trade and cooperation, upstream and downstream, in crude oil and natural gas,” said Wen.
China is already Saudi Arabia’s single largest customer, and further crude from the Kingdom is needed to meet demand that, while dues to moderate somewhat from the boom of the last decade, is still slated to grow dramatically in 2012.
Chinese oil demand rose by 6.8% in 2011 over 2010, burning an average 9.24 million barrels per day (bpd) compared with 8.65 million bpd according to government data, an amount roughly equivalent to the total crude exports of Russia or Saudi.
Meanwhile South Korean Prime Minister Kim Hwang-sik has been in talks with the government of Oman to boost supplies from the Sultanate, and is currently discussing supplies with the UAE.
South Korea is the fifth-largest oil importer in the world, and current draws 10% of its supplies from Iran, 10% from the UAE and 2% from Oman.
“Both sides have agreed to closely cooperate to continue stable energy supply, including liquefied natural gas and crude oil in the face of instability in the international crude oil markets,” the Prime Minister’s Office said in a statement, referring to the meetings between Oman and South Korea.
Japan, also a key customer for Iran’s oil, has vowed to cut orders from the Islamic republic after an appeal to do so by US Treasury Secretary Tim Geithner on Thursday.
Iran has warned gulf states not to increase supplies in reaction to future sanctions, with the country’s OPEC representative Mohammad Ali Khatibi saying Iran “would not consider these actions to be friendly.” The tensions between Iran and the gulf states could resume after a tentative detente at December’s OPEC meeting in Vienna, when agreement was reached on a cartel-wide production ceiling of 30 million bpd.
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