China imported daily average of 4.69 million tons, or 34.38 million bpd, of crude oil from Russia last month. That’s 9.3 percent more than the February average, putting Russia back at the top spot of China’s foreign oil suppliers, above Angola, which sits at number 2. Saudi Arabia fell to number 3 in March, as it cuts output deeper than it was expected to under the OPEC agreement from November.
The shuffle comes amid talks in OPEC about extending the six-month production output cut to further strengthen prices, which turned out to be less responsive to the international effort than expected.
Indeed, in six of the last seven trading sessions, crude oil benchmarks actually slipped as doubts about an extension agreement begin to rise among traders. WTI is back below $50 and Brent is holding a smidge above.
The doubts came as it emerged that global supplies are still close to record highs, despite OPEC’s efforts to trim them since January. In fact, over the first quarter of the year, these supplies have increased, reversing the initial enthusiasm with which markets greeted the news of the agreement.
Now Russia is fueling the worry further: Reuters reported that some Russian government officials have said the country’s oil production could rise to the highest in 30 years in 2017 if the extension agreement falls through. The possibility is reflected in local oil companies’ investment plans for the year.
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For now, Russia has given its broad support for an extension, although the only specific that has come from Energy Minister Alexander Novak so far was a comment made in March stating that it is too early to discuss the issue.
Meanwhile, Saudi Arabia’s King Salman has removed austerity measures aimed to narrow the budget gap opened by the low oil prices. This, according to big-name commodity analysts, makes the extension particularly important for the Kingdom. It is likely that Saudi Arabia will again spearhead the drive for an extension and could possibly agree to cut its own output further, which will allow Russia to cement its place as top supplier to China.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.