JEDDAH: Saudi Aramco said rising oil demand from its largest crude buyer, China, will offset declining consumption elsewhere. "I believe increased Chinese demand offsets declining consumption in the OECD nations," Khalid Al-Falih, chief executive officer of Aramco said in a speech posted on the firm's website. "(It) is essential to encouraging necessary investment in exploration as well as oil production, refining and transportation capacity, which ultimately benefits all petroleum consumers," Falih said. China, the world's No. 2 oil user, is surpassing the US as Riyadh's largest crude oil buyer with volumes poised to touch an average of 1 million barrels per day this year, or roughly one-fifth of China's total crude imports. "Our relationship is founded on the provision of steadily growing volumes of crude oil currently about a million barrels per day, making Saudi Aramco China's largest and most reliable supplier," Falih said. The Organization for Economic Cooperation and Development said Tuesday the recent spike in oil prices could shave half a percentage point off growth of the world's advanced economies by 2012. In study entitled "The Effects of Oil Price Hikes on Economic Activity and Inflation" said "the recent oil price hikes may have a modest impact on activity in the near term … if the $25 increase in the price of oil that has taken place since the Tunisian uprising (earlier this year) were to be sustained, activity could be reduced by about 0.5 percentage points in the OECD area by 2012 and inflation cold rise by 0.75 percentage points." In its previous forecasts published in November, the Paris-based policy and research body for governments of 34 leading economies forecast 2.3 percent growth for the OECD area this year and 2.8 percent in 2012. "At currently low levels of inflation and expectations, monetary policy may not need to react to the recent oil price hikes," added the study. Sino-Saudi trade ties have grown as Chinese economic growth has boosted its fuel consumption and increased its reliance on the kingdom's crude. "The oil industry itself looks to China as the largest source of incremental demand growth." Aramco has already partnered Sinopec in the joint venture Fujian plant in southeast China. It signed last week an initial deal with China's Sinopec Group to jointly build a $10-billion Yanbu refinery on the Red Sea coast, a pact that further cements ties between the two energy giants. Aramco said Sunday its subsidiary, Aramco Overseas Co. had signed a memorandum of understanding with PetroChina Company Ltd, a subsidiary of China's state-owned oil giant CNPC to develop a 200,000 bpd crude refinery in in Yunnan, the Chinese province that borders on Myanmar. Oil prices rose Tuesday as unrest in Yemen threatened to crimp energy exports from the Gulf region. Brent crude for May rose 74 cents to settle at $115.70 a barrel. US crude futures for April rose $1.67 to settle at $104 a barrel in light volume on the contract's expiration day. The more active May contract settled up $1.88 a barrel at $104.97. Despite edging down, oil prices continued to win support from "tensions in the Middle East," said Ong Yi Ling, an investment analyst for Phillip Futures in Singapore. Libya was producing 1.69 million barrels a day before the unrest, according to the International Energy Agency. It is now producing only 400,000 barrels a day. "Investors are expecting that Libyan oil is not returning to the markets any time soon," said Ling. World oil prices had closed up more than a dollar Monday in the aftermath of initial air strikes on Libya by Western jets at the weekend. They were also boosted by heightened turmoil in Yemen, another oil exporter. And Japan inability to gain full control of the Fukushima nuclear plant amid meltdown fears also contributed to continued high volatility in the market, analysts said. Analysts at JPMorgan said they expected more volatility in a multiple-crisis environment. "Oil prices continue to see-saw with developments in the Middle East and Japan. Potential for short-term disruptions as well as low-probability but high-impact events is driving the market," they said. Oil prices could climb to $120 per barrel this year, a level that would be “acceptable,” Iraq's oil minister said Tuesday while announcing that the country would hold its fourth energy bidding round in November. Abdul-Karim Elaibi said that current prices for crude “indicate that the (oil price) will reach $120, which is an acceptable price.” Oil prices, currently at about $102 per barrel for the US benchmark crude futures contract, have climbed as fighting in Libya raised concerns about supplies.
