China's Oil Giants Struggle as Prices Collapse

China's state oil companies are suffering from the plunge in crude prices at a time when the world's largest importer should be celebrating lower costs. The country's national oil companies (NOCs) are dealing with dilemmas on several fronts at once as international prices fall nearly 45 percent below the cost of domestic production.

The huge gap resulting from Saudi Arabia's price war with Russia and weakened demand during the COVID-19 crisis means that the NOCs are likely to lose money on the 3.9 million
barrels per day (bpd) that China produces at home. The low import prices, which sank to U.S. $23 (163.3 yuan) per barrel at the start of this week, also threaten to raise import dependence far past the point that is considered strategically vulnerable. The price slide has already slashed NOC profits and pushed the state giants to reduce capital spending on new domestic drilling and resource development.

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