Saudi Oil Exports to China Set to Hit Two-Year High in August

Crude oil exports from Saudi Arabia to China are seen reaching the highest level in two years in August, Reuters reported today, citing half a dozen unnamed trade sources.

The daily average, according to refiner allocation data seen by the publication, stands at 1.56 million barrels, for a total monthly volume of 51 million barrels. That’s despite the Saudis’ recent price hike for Asian buyers of their crude in August. Asian buyers will have to pay between $0.90 and $1.30 more per barrel of Saudi crude next month, while buyers in North America will enjoy the most modest price hike, by between $0.20 and $0.40 per barrel.

The August average is just shy of the 1.57 million barrels daily in average Saudi oil exports to China for 2024. That number, in turn, was a sharp drop from the 2023 average, which stood at 1.72 million bpd. It was also an increase on July, when Saudi oil exports to China were estimated at a total of 47 million barrels, down from some 48 million barrels shipped in June.

Appetite for Middle Eastern crude jumped among Asian buyers following the Israeli-Iran conflict from June, which pushed spot price premiums higher, making buyers bet more heavily on term deliveries from Middle Eastern producers, whose official selling prices became more attractive than spot market ones.

China is a critical market for Saudi Arabia but it is just as critical for Russia and Iran, Saudi Arabia’s fellow OPEC+ members that have become the largest suppliers of crude to Chinese refiners, mostly thanks to the discount prices they are offering and the flexible terms. Russia and Iran supply oil mostly to independent refiners—the so-called teapots—while Saudi Arabia supplies state-owned refiners CNPC and Sinopec.

Now, however, OPEC itself expects oil demand growth to weaken globally on the back of weakening in China, meaning the competition among oil exporters will likely intensify—unless the weaker demand forecast fails to materialize.

By Charles Kennedy for Oilprice.com

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