Abu Dhabi, UAESunday 26 May 2019

US-China trade tensions had limited impact on oil demand, says Saudi energy minister

The kingdom's industrial clusters programme signs agreement with a consortium to build a solar cell manufacturing hub

Saudi oil minister Khalid Al Falih speaks at an event in Abu Dhabi. Opec+ would undertake market corrections, if needed, should US-China trade tensions impact demand. Victor Besa/ The National
Saudi oil minister Khalid Al Falih speaks at an event in Abu Dhabi. Opec+ would undertake market corrections, if needed, should US-China trade tensions impact demand. Victor Besa/ The National

The US-China trade war has had only limited effect on oil demand, with Opec+ prepared to take “appropriate response” should there be a spillover effect, said the Saudi energy minister.

“We’ve seen the fluctuations of trade and some of it may be impacted by the US China trade issues, but I think overall global economy remains strong enough,” Khalid Al Falih said in Abu Dhabi. “The impact is going to be mild and shallow and short. Oil demand remains sufficiently strong and we’re vigilant enough to take appropriate response if there’s any impact on demand.”

The global economy is forecast to grow 3.7 per cent in 2018 and 2019, the same pace as 2017, according to the International Monetary Fund. The fund expects the US economy, the world’s largest, to peak at 2.9 per cent this year and start to slow next year as the economic stimulus introduced in the wake of the 2008 global credit crisis begins to wind down and the effect from tariffs begins to hurt.

China is the world’s second-largest consumer of oil after the United States, with an annual consumption of 608.4 million tonnes of oil equivalent in 2017, according to the BP Statistical Review of World Energy 2018.

The ongoing trade war between the US – the world’s largest producer of oil – and China has largely been over base metals, but Beijing has slapped tariffs on liquefied natural gas from the US.

The two countries have set March 1 as a deadline to negotiate a trade deal, otherwise the US will raise tariffs on $200 billion of Chinese imports to 25 per cent from 10 per cent on March 2.

China has increasingly switched to gas and looks to add more renewable capacities into its grid over concerns over pollution in its big metros such as Beijing and Shanghai. Slowing Chinese demand amid an environment of oil glut has been a cause of concern for Opec, which is currently undertaking production cuts alongside producers outside the group led by Russia to stabilise the price of crude, which fell from four-year highs in October to 30 per cent of its value in December.

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China has increasingly switched to gas and hopes to add more renewable capacities into its grid over pollution concerns in its big cities such as Beijing and Shanghai.

Slowing Chinese demand amid an oil glut environment has been a cause of concern for Opec, which is making production cuts alongside producers outside the group led by Russia. The aim is to stabilise the price of crude, which fell from four-year highs in October to 30 per cent of its value in December.

Mr Al Falih also said that “detailed negotiations” were under way between state oil producer Saudi Aramco and Saudi Basic Industries Corporation (Sabic) over the acquisition of 70 per cent of the latter’s shares.

“It’s a commercial negotiation between a company and a seller,” he said. “When they’re done, they’ll announce. Of course it involves price and there are other issues that are part of detailed negotiations.”

Sabic is the largest petrochemicals producer in the Middle East and among the largest chemical companies globally.

The Saudi energy ministry also announced a $2 billion four-way preliminary agreement between its industrial clusters programme, Sabic, South Korea’s OCI and China’s Longi to build a solar panel manufacturing plant.

The feasibility study, which is expected to be completed by the middle of the year, would explore opportunities for the development of a complex to manufacture polysilicone, the basic building block of solar panels.

“It will be supported by carbon black, and it will be an integration, connecting with energy production,” said Tariq Bakhsh, senior vice president at the National Industrial Clusters Development Programme.

Carbon black is a byproduct from the combustion of heavy petroleum and is commonly used as a filler in tyres and rubber products.

Updated: January 14, 2019 04:40 PM

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