• 7 minutes Does S Arabia Have 2 Mln Barrels in Spare Capacity?
  • 11 minutes Oil prices going down
  • 19 minutes Venezuela, the largest oil reserve in the world, faces deep shortages of motor oil
  • 20 hours 67.50 was the low for now, $70 - $76+ back in play
  • 19 hours EU And Japan Sign Historic Free Trade Deal
  • 18 hours Where 3 Million Electric Vehicle Batteries Will Go When They Retire?
  • 18 hours Daimler and BMW Will Beat Tesla in EV Race
  • 1 day Chartist predicting a $1 fall, after WTI drops $10
  • 19 hours China’s Technology Sector Takes On Silicon Valley
  • 23 hours Germany: We Can No Longer Fully Rely On U.S. White House
  • 12 hours Chile Becomes The Latest Country To Commit To 100% Renewables
  • 2 days Well from $74 we hit 67.xx now what?
  • 23 hours Trump-Putin Helsinki Summit And Oil Prices
  • 2 days Rio Tinto Says $4-Million Goodbye to Coal
  • 2 days Trade War of 1930s, Extended the Great Depression
  • 2 days Kaplan Says Rising Oil Prices Won't Hurt US Economy
  • 19 hours Trump mulling releasing 5 to 30 Mill Barrels
Alt Text

Oil Retraces On Libyan Production Surge

Despite the global oil market…

Alt Text

Bullish Sentiment Soars As Oil Outages Mount

Oil markets appear to be…

Alt Text

How China Will Win The Solar Race

China, the world’s biggest carbon…

Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

More Info

Trending Discussions

Is Saudi Arabia Losing Its Asian Oil Market Share?

Saudi Arabia

As Washington and Beijing exchange trade war barbs and as tensions in Syria drive up global oil prices, reintroducing geopolitical pressure that had been largely removed from the oil price equation in recent years, news broke Friday that China’s crude oil imports increased in March to the second highest level on record, calculated on a daily basis.

Crude oil shipments in March totaled some 39.17 million tonnes, or 9.22 million barrels per day (bpd), the country’s General Administration of Customs said on Friday. This compares with 8.41 million bpd in February, and January's record 9.57 million bpd. Some of the increase is attributed to Chinese refiners replenishing stocks on generous government quotas and ahead of peak maintenance season.

Reuters said at least three large refineries have kicked off major maintenance that will last 40-60 days between April and May. The three refineries, state-run Sinopec Group’s Zhenhai and state-run PetroChina's Sichuan and Jilin, have a combined daily processing capacity of 860,000 bpd. The three refineries will also decrease oil imports from Saudi Arabia, Kazakhstan and Russia, the report added. Sinopec is Asia’s largest refiner.

China strikes back

Just four days ago, Sinopec, one of Saudi Aramco’s biggest customers, said that it would reduce Saudi oil import loading in May by 40 percent due to Saudi Aramco increasing the price of its flagship Arab Light Crude sold to Asian refiners. Saudi Arabia produces a range of crudes ranging from Arab Extra Light to Arab Heavy and prices each blend accordingly.

A Unipec official said that the Saudi price increase represented “unreasonable prices as they do not follow the pricing methodology." Unipec is the trading arm for Sinopec Group. Typically, older and simpler plants need light, sweet crude. More sophisticated refiners often value heavy grades because the lower cost of such oil results in higher profit margins

A report by global commodities data provider S&P Global Platts said that Aramco surprised many Asian customers by raising its Arab Light Crude Official Selling Price (OSP) differential for May by 10 cents/b from April, contrary to Asian market consensus of a minimum 20 cent/b cut.

Related: New Sanctions On Russia Could Lift Oil Prices Further

Another source said that they were still trying to understand why and even how Saudi Aramco raised its OSP for Arab Light Crude for May. Two trading sources at two North Asian refineries said on Tuesday that they each planned to reduce May orders from Saudi Arabia by 10 percent, CNBC reported.

Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices. Arab Light Crude had already been trading near three-year highs, even as the state-owned oil giant had lowered OSPs for medium and heavier crude grades.

Due to Saudi Aramco’s increased OSP for its flagship crude to Asia, Chinese companies will likely pivot to more Iraqi, Iranian and even Russian crude procurement going forward, all three are already competitors for oil market share with Saudi Arabia in both Asia and China.

This also raises the question: Why would Saudi Aramco increases its OSP and jeopardize its market share with the world’s largest oil importer when historically the Kingdom has fiercely guarded and battled to keep that market share intact?

This struggle for market share in China intensified as OPEC and participating non-OPEC countries implemented its oil output cut in early 2017, which has now brought OECD oil inventory levels to five-year averages.

Related: Oil Slips As U.S. Scales Back Confrontation With Russia

“Saudi Arabia, which is traditionally the biggest seller to China, certainly wants to keep stable supplies to its largest buyer in Asia even though it’s cutting output at home,” Li Li, an analyst with Shanghai-based commodities researcher ICIS-China, said last August. “China has the priority seat when it comes to buying oil from Saudi Arabia. China has the same feeling, Saudi oil is still a very reliable source.”

China could turn to more oil imports from U.S. shale producers since U.S. shale oil supply also offers high quality light sweet crude. However, as Trump and Chinese President Xi Jinping continue to play a geopolitical poker game over trade, China could also use U.S. oil imports in retaliation against new U.S. tariffs – a possibility recently covered by several media outlets.

U.S. light, sweet crude oil accounted for more than half (56 percent) of total domestic crude oil production in 2017, and in the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2018 (AEO2018) Reference case, this share will grow to 6 percent by 2020 and to 70 percent by 2050.

By Tim Daiss for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News