China will 'compel' Saudi Arabia to trade oil in yuan

China is about to force Saudi Arabia to sell oil in exchange for Chinese Yuan. When this happens and the rest of the oil market understands it is the better option than trade through USD, it will follow the example and abandon the US dollar as a world reserve currency.

Karl Weinberg, Chief Economist and Managing Director of High Frequency Economics, said Beijing is becoming the world's leading oil demand as China surpassed the United States as "the world's largest oil importer".

Following the 1974 agreement, between US President Richard Nixon and Saudi King Faisal, Saudi Arabia has accepted payments for almost all oil exports to be made in dollars. However, China is importing more and more oil from countries around the world. The idea of ​​buying the same amount of oil in dollars is becoming more and more irritating to Beijing.

In recent years, China has been endeavoring to intensify the pressure on Saudi Arabia to trade in oil through yuan, and as a result, Riyad has enjoyed less oil sales to Beijing.

What does all this mean for the markets?
Oil trading is currently at $600 to $800 billion. If it switches from dollar to yuan, the USD exchange rate is expected to drop sharply as the US currency supply will pick up significantly. On the other hand, demand for goods and services in China will increase further, and experts expect strong growth in the stock market in China and the economies directly linked to the country, such as Australia and New Zealand.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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