The world's big powers are in growing competition to buy oil from top exporters and develop projects in energy-producing states, eager to secure supplies to propel economic growth.

China has agreed to boost oil imports from Saudi Arabia by over a third next year, trade sources said this week. The deal comes days after confirmation that China will also boost imports from Iran by a third.

The competition stems from rapidly rising fuel needs outside the United States. That demand is likely to keep a strain on supply that this year helped send oil prices to a record high near $100 a barrel.

Emerging markets are scrambling to get more oil because their economies are growing very fast, said Francisco Blanch, head of commodity research at Merrill Lynch.

There's very little chance of supplying China with an extra half a million barrels per day each year for the next 10 years, without somebody else taking a hit.

Oil demand in China, the world's second-largest consumer, is set to rise by 5.7 percent next year to 7.96 million barrels per day, according to the International Energy Agency.

Consumption in India -- which is also looking for higher crude supply from Iran and Saudi Arabia, according to an official at Indian refiner Bharat Petroleum Corp. -- is expected to expand by 2.9 percent.

By contrast, demand in top consumer the United States is forecast to increase by only 0.9 percent and consumption in Europe to grow by 1.4 percent.

Saudi Arabia, the world's top exporter and a U.S. ally, has made clear it is counting on demand from Asian economies to justify the billions of dollars it is spending to increase output capacity.

For so long, America had a monopoly on much of the crude oil exports from the Persian Gulf, said Mehdi Varzi, a consultant at Varzi Energy. It is now facing increasing rivalry.


China is also investing directly in oil projects in Iran, the world's fourth-largest oil exporter.

Sinopec (0386.HK: Quote, Profile, Research), China's top oil refiner, agreed earlier this month to invest $2 billion in Iran's Yadavaran oilfield, which according to Iranian estimates holds recoverable oil reserves of 3.2 billion barrels.

The deal dismayed the United States, which says such accords undermine international efforts to pressure Tehran to give up its nuclear work.

Oil executives expect increasing amounts of Iranian crude to flow to China, in part because Beijing has been reluctant to back a U.S. drive for further sanctions against Iran.

The U.S. has banned oil imports from the Islamic Republic since 1995.

Politically, China will probably end up taking more Iranian crude, said an executive at Western oil company that buys oil from Iran.

China has also been aggressive in Africa's energy sector in recent years, showing a higher appetite for risk than Western rivals, and already funds oil projects from Angola to Sudan.

They do regard forging relationships and providing investment and signing agreements in as many countries as possible as a good strategy, said Rosemary Hollis, director of research at British thinktank Chatham House.

So they are hedging their bets. They haven't put all their needs in one basket.

Chinese firms are also moving into Nigeria, for years the backyard of Royal Dutch Shell (RDSa.L: Quote, Profile, Research), Exxon Mobil (XOM.N: Quote, Profile, Research) and other Western oil companies.

Analysts say the competition from state-backed oil firms presents Western firms with a race to gain access to reserves and supplies, perhaps at the expense of profits.

Some analysts see growing competition as a good thing for the United States, if less so for U.S. companies, because the resulting increase in supplies will help relieve pressure on prices.

I'm sure the U.S. government would be delighted if the U.S. companies had more of a share, said Patrick Clawson of the Washington Institute for Near East Policy.

But frankly, the activities of Chinese companies serve U.S. interests.

(Additional reporting by Chen Aizhu; editing by James Jukwey)