Tuesday, February 19, 2013

China increasing Saudi Arabia oil imports by 11% in 2013. Joint 10 Billion venture in Saudi Red Sea Coast. London begins Swaps of Yuan.

I have been keeping my eyes on China.  I believe watching what is happening there will give us a clue when the dollar will be dropped for the Yuan as the Global Reserve Currency.  I also believe it is due to Saudi Arabia staying with the dollar as oil trade (Petrol Dollar) as the reason why the dollar is still the official reserve currency. 

Ever since the 2008 crisis, China has been positioning itself and it's currency to be the Global Reserve Currency.  The BRICS began trading in the Yuan between themselves last year.   Australia is trading with China in the Yuan.   China does things slowly but surely.

I have been writing about China and what they are doing the last couple of weeks.  From the expectation of their demand for gold outstripping the supply by 2015,  IMF using the words and confirming "Global Reserve Currency" for the Yuan, and China, itself using the words "Global Reserve Currency" for the Yuan.   All of this information was just in the pass couple of weeks.

I found information in Arab news, China will be increasing their oil imports from Saudi Arabia this year by 11%.  They will be importing 120,000 more barrels per day than in 2012 to be 1.17 million barrels per day, from Saudi Arabia.

To give you an idea what the U.S. imports from Saudi Arabia, I found that information here. 
The U.S. imports approximately 1.319 million barrels a day (from Nov 2012 info) from them.   In November, U.S. imports decreased 38 thousands barrels from the month before.   Here are facts about Saudi Arabia and their oil business overall. 

If you look at the numbers China is catching up with the U.S. in their imports of oil on a per day basis from Saudi Arabia.  When you look a the numbers over all, you can see the U.S. has stayed steady and has had some declining oil demand compared to China having increasing oil demand.  

Why look at all of this together?  Why try and analysis what China and Saudi Arabia are doing?  

To me, those two countries are the key to the dollar demise.   They are countries to watch very closely and read in-between the lines in what new business and joint ventures they are doing together.  To me the smart thing to do to know what may lie just ahead and to position yourself for the future by getting hints, is to dig into what is happening with China and Saudi Arabia.  

Here are portions from the Arab News article: (this was written in December of 2012)

BEIJING: China’s crude oil imports from Saudi Arabia are likely to rise about 11 percent next year (2013), faster than this year’s growth rate, as refiners lift output in anticipation of an economic recovery and an increase in fuel demand, industry officials said.

China, the world’s second-largest crude consumer, is expected to buy about 1.17 million barrels per day (bpd) of Saudi oil next year, 120,000 bpd more than this year’s contracted amount. The figures are based on estimates by industry sources with direct knowledge of the supply situation.

China, which imports about 5.3 million bpd of crude a year, is Saudi Arabia’s third largest customer after the US and Japan. In the year to October, imports from Saudi grew 8.6 percent on the year to 1.06 million bpd, compared to growth of 12.6 percent in 2011. 

China sees Saudi Arabia, the world’s top oil exporter, as a strategic partner capable of providing stable supplies, and the state energy companies of both nations are in a $10 billion joint venture to build a 400,000-bpd refinery on Saudi Arabia’s Red Sea coast. 

China’s crude oil demand is one of the factors propping up global crude prices, at around $100 per barrel . This year, China’s oil demand is forecast to grow just 2.8 percent in its slowest pace in more than a decade, the International Energy Agency says, due to a slowdown in the economy, but there are signs of a revival next year. 
Sinopec Corp, Asia’s largest refiner, would take in more than 80 percent of the total Saudi supplies to China. China’s No.2 refiner, PetroChina, and state-run Sinochem Corp, will use up the rest, the sources said.
“Sinopec’s imports of Saudi crude have been increasing steadily over the past years and are expected to rise further as Sinopec’s refining capacity will rise steadily over the next few years,” said one Chinese trader.

All of the countries are upset with the U.S. for printing dollars in the billions every month.  There are currency wars happening around the world, even though countries came out of the G20 meeting in Russia this last weekend saying "No Currency war."  


"We have not seen any such thing as a currency war. We've heard currency worries, not currency wars," IMF Chief Christine Lagarde said at the forum.
"I see no serious grounds for currency wars but the crisis made all countries fear national protectionism. Some countries attempted to heal the crisis with money printing and this lead to debt troubles."
 This makes analysts say that it’s too late to renounce currency wars as they are already in full swing, says Mikhail Delyagin, the head of the Institute of Globalization Problems.
"These wars are being waged for years and everybody seems to have forgotten about their main player - the US. America is great at devaluating its dollar and, thus, hampering other traders. It’s a zero or even a minus-sum game as this time a participant's loss is greater than the other participants’ gain. And the main thing is that the participants keep changing places."

China is making the Yuan a Global currency very slowly and here is a good explanation why. 

"If the currency is regulated by the government not by the situation on the market it cannot function as a global currency in economic relations. In order to make it a global currency it is necessary first of all to turn it into a market currency. If it happens the Yuan rate will double in comparison with its current rate and the competitiveness of Chinese goods will see a drastic decline."

They are positioning themselves for the Yuan to be a traded currency.  Another major step was just taken in London this week.  

Small portion:

A BANK of England pledge to help London become a global trading center for the yuan has stirred talk of a revival in the city's fortunessimilar to the explosion of the US dollar market in the 1960s and 70s.

In what many bankers saw as a pivotal movethe central bank said last month it was ready "in principleto adopt a currency swap line with the People's Bank of Chinaproviding a two-way pipe to the city as the still-unconvertible yuan starts to emerge as world reserve currency.
Britain would become the first major developed economy to install a currency swap line with Chinareplicating existing arrangements available for the dominant freely-traded currencies such as the dollareuro and yen.
China has agreed swap lines with more than 15 other countries but these tend to be emerging economies that have natural resources or goods used in manufacturing to export. The list does not include major industrial powers such as the United States,euro zone countries or Japan.
However, in a deliberate push to internationalize the yuan, or renminbi, China has beendeveloping an offshore market for it, as a precursor to allowing global firms, banks andasset managers access to its domestic market.

So, are you reading between the lines here?  London has just begun Swap lines with the Yuan.  Last year the CME group began trading the Yuan in Chicago. 

It is simply good sense to watch everything going on with China and the Yuan and to pay attention to all of their business in Saudi Arabia.   The facts are... we are not going to be told a few months before when Saudi Arabia begins trading directly with China in the Yuan.  It will be an overnight event/statement.   It doesn't seem that China is quite ready for the Yuan to be the total reserve currency at this time, but they are definitely working that way.  When it happens they will have protections in place that will not blow up their trading balances around the world.   They are very careful and know exactly what they are doing.  

When they have everything in place, we will not be warned in advance.  People in the U.S. will wake up, one Monday morning to the shock of the dollar being replaced around the world by the Yuan.  That day the dollar will go "Zimbabwe."   It will be a catastrophic event in the United States as the rest of the world breathes easier and can use a 'gold' backed currency to trade with.  But to those paying attention and not being distracted by the fake news on MSM, they will not be shocked and have already protected themselves for the eventual outcome.  

People need to stay paying attention to what is happening in China.  I will be watching every day for news out of that area and their trading partners to get hints on when the "Big" day will arrive for the Yuan.  We will know that day, when Saudi Arabia makes an announcement about how they will continue trading oil and in what currency.

A little extra news tidbit from Russia.... the manipulation of Gold prices and how it is ready to surge.

1 comment:

  1. China and Russia are buying up massive amounts of gold as well. Russia has joined China in taunting the US and Japan over the Senkaku Islands. The US/NATO alliance and Russia/Iran axis are fighting a proxy war in Syria (and Iran has been trying to exit the petrodollar for awhile now). Is it tinfoil to ask if this whole Arab Spring thing was to maintain the dollar supremacy by removing oil-rich leaders who wanted to trade outside of dollars?

    There is little doubt that dumping the dollar will result in sufficient inflation to cause civil unrest. This is a possible answer to why the DHS and increasingly the US military are training to fight in US cities.