Giving Away Their Oil For $75 -- November 22, 2014

Actually I don't know what Saudi is getting for their oil, but I know it's way down from their highs. Saudi spokesmen, more than once, have said that they are concerned about their resource, and that they don't want to deprive future Saudi generations of oil income.

But at the moment they are giving their oil away for quite a discount.

And China is buying all they can get. See this post from September 19, 2014. In this week's issue of BloombergBusinessweek, page 13, huge half-page graphic and story: Energy Ahoy, China!

With oil prices off about 30 percent since June, China is importing record amounts of crude to build up a strategic reserve. Cheap fuel is giving tanker companies their profits in years.

Remember: This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Make no travel plans based on what you read here. I post quickly and frequently; typographical and factual errors are likely. If this information is important to you, go to the source.

Some statistics from the article:

• Number of largest class tankers heading to China: 76. (Historical average: 63)
• Bbls of oil China has added to its reserves since mid-August: 35 million bbls.
• By mid-2015: China will have room for another 50 million bbls.

China has bought a 25.3 million metric tons, on average, each month in the first 10 months of 2014, a record.

What is not being said is where the oil is being stored. In addition to conventional locations, there have been articles suggesting that China is storing oil off-shore in tankers. It is noteworthy that "largest class tankers" were referenced. Old, smaller ocean-going tankers are often sold for scrap or scuttled; my hunch is that a lot of these tankers will get new life as storage tankers off-Chinese shores.

For comparison: The US Strategic Petroleum Reserve (SPR) is an emergency fuel storage of oil maintained by the United States Department of Energy. It is the largest emergency supply in the world with the capacity to hold up to 727 million barrels (115,600,000 m³). -- Wiki

Currently the SPR holds 691 million bbls (a dynamic link).

Reminder: to go green, China needs to build 1,000 nuclear reactors; the Chinese gave their handshake to POTUS on that one (LOL); something tells me China is going to be importing a lot of oil before they get their thousandth nuclear reactor up and running.

And as long as Saudi is willing to give their only resource away, China is willing to buy it with all their American dollars. What we are seeing is a transfer of oil under the desert sand into Chinese tankers. It will be interesting to see how long Saudi likes this arrangement.