China Clearly Supporting Russia on Oil
April 27, 2016 (EIRNS)—Sputnik, in an article today by regular contributor Pepe Escobar on the "failure" of the Doha meeting of oil-producing nations to reach deal, notes, "The City of London—via the FT—wants to convey the impression to global public opinion that it all boiled down to a dispute between Prince Mohammed bin Salman—the conductor of the illegal war on Yemen—and Saudi Oil Minister Ali Al-Naimi. The son of ailing King Salman has been dubbed the unpredictable new voice of the kingdom’s energy policy."
Escobar, based on a "financial source with very close links to the House of Saud," writes that it was actually the Obama White House which killed the "oil production freeze" agreement Russian diplomacy had achieved with Saudi Arabia and other producers.
"A famous 3 a.m. call did take place in Doha on Sunday," he writes. "The young Salman called the Saudi delegation and told them the deal was off. Every other energy market player was stunned by the reversion.
"Yet the true story, according to [the source], is that the United States threatened the Prince that night with the most dire consequences if he did not back down on the oil price freeze.
"So—predictably—this goes way beyond an internal Saudi matter, or the Prince’s erratic behavior, even though the House of Saud is indeed racked by multiple instances of fear and paranoia.... As the source explains, an oil production cut would have hindered the US goal of bankrupting Russia via an oil price war, which is what this is all about."
This is undoubtedly how some leading circles in Russia see what failed to happen at Doha.
But the price of oil has not fallen since that failure several weeks ago; it has actually continued its slow rise since mid-February, now reaching $45/barrel for WTI. One clear factor is China’s support for Russia. China for the past month or so has not only been increasing imports to meet rising demand, but clearly buying and stockpiling additional oil on tankers at several of its ports. Over the past year, the Persian Gulf producers’ share of China’s imports has dropped from 55% to 44%, while the Russian share has risen from 14% to 21%.
The other factor overcoming the failure at Doha has been the ongoing "capitulation" of the shale oil sector of Obama’s United States. It has been responsible for a 10% drop in total U.S. oil production over the past 18 months, and this fall is accelerating as more and more U.S. onshore oil producers go bankrupt, lose their operating credit lines, or shut down production costs to try to stay out of bankruptcy.