As relations between Saudi Arabia and the U.S. continue to erode, there a is strong consideration to begin trading oil in Yuan as opposed to the greenback.
If the move goes ahead, it would put a huge dent in the U.S. dollars dominance of the global petroleum market and would mark another strong move by the world’s largest crude oil exporter towards Asia.
Talks between Saudi Arabia and China over Yuan priced oil contracts have been off and on for the best part of six years but have accelerated this year, with Saudi Arabia becoming increasingly unhappy with decades-old U.S. security commitments to defend the kingdom.
After the significant decline in the Yuans value earlier in the week, its value steadily rose through the day’s trade as reports that Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in the currency.
As this stage, there is no clear indication of when Saudi Arabia could or would make the switch nor how much of its sales may be denominated in Yuan if it were to change. It does, however, highlight the reality that the conversation to reduce or replace the greenback in trading is very much alive.
The relationship between Saudi Arabia and the U.S. has been strained by various issues ranging from Yemen’s civil war to Iran’s nuclear program.
