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Summary

China has surpassed the US as the world's largest oil importer.

However, it is more like Russia and OPEC in its ability for national government to make deliberate decisions about oil supply and demand.

China can manipulate oil consumption almost as much as, and far more easily than, (N)OPEC can manipulate production.

Chinese oil production is likely to continue to decline; however, its influence over oil prices will still match or even exceed OPEC's.


The decline in oil (NYSEARCA:USO) prices seems to have hit the Asia-Pacific region especially hard, with China's production seeing record declines in 2016 and continuing more of the same this year. Falling production is usually associated with declining influence in oil matters and a greater dependence on others, necessitating a "take what they give you" approach to the oil market.

In the particular case of China, OPEC and private analysts have generally characterized it as a classic case of importer co-dependency. That is, China has to take the price OPEC settles on, and OPEC has to be careful not to hit China too hard or it might weaken its economy enough to depress global oil demand. There is some fear at present that may be about to happen. But even in this small concession of the Middle Kingdom's importance, China is still presented as the weaker side, essentially waiting on OPEC's decision for its fate.

As I've explained before, this is just not correct when it comes to China. In fact, China's government is probably more in control of the oil market than any other government, including the ones in Moscow, Riyadh, and Washington, D.C. It will neither go up nor down, except by the government's decision.

First, some Chinese oil companies are now reversing their spending cuts and trying to once again expand output. But secondly, and far more importantly, China does not need to restore any substantial degree of production to achieve a commanding position in setting the course of the global oil market. Unlike OPEC, its power over prices lies in its status as a consumer, not a producer.

Source: Seeking Alpha
Lien: https://seekingalpha.com/article/4081306-everyone-misunderstands-oil-china
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