If China can’t come by oil in the open market, it can send a big check to a country with oil which could use a few bucks. According to the FT "China has offered export guarantee facilities worth up to $50bn to encourage investment in Nigeria in a bold strategy to woo Africa’s biggest oil producer."
And, why not? China needs the oil to fuel its 10% a year GDP growth. The great African nation needs that capital.
Of course, if China can corner the market of much of the oil coming out of Nigeria, the net effect may be to raise oil prices to other consuming nations. When so much black gold goes to one nation, it cuts the supply considerably.
The move by China may also set a precedent for the Balkanization of the oil markets. There is nothing substantial to prevent the US from making similar arrangement with Canada, Mexico, or one of the Middle Eastern nations.
The China play could break the pact between supplying and consuming nations which has lasted for decades. Oil was essentially "pooled" and available to all nations at the same price. The philosophy was the underpinning of OPEC.
The markets have concerns that oil prices gyrate now. A market where buyer and seller pair off into groups could completely disrupt international pricing. Trading oil will be like going to the track. The Racing Forum is on sale for $2 and the $100 windows just opened for betting.
Douglas A. McIntyre
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