• 4 minutes Drone attacks cause fire at two Saudi Aramco facilities, blaze now under control
  • 7 minutes China Faces Economic Collapse
  • 13 minutes Oil Production Growth In U.S. Grinds To A Halt
  • 15 minutes Iran in the world market
  • 18 minutes Ethanol, the Perfect Home Remedy for A Saudi Oil Fever
  • 34 mins Never Bring A Rapier To A Gun Fight
  • 2 hours One of the fire satellite pictures showed what look like the fire hit outside the main oil complex. Like it hit storage or pipeline facility. Not big deal.
  • 22 mins Trump Will Win In 2020 And Beyond..?
  • 17 hours USAvChina.com
  • 3 mins Bahrain - U.S.: Signed Deal To Buy Patriot Missiles
  • 19 hours The Belt & Road Initiative: A Wolf in Sheep's Clothing?
  • 8 hours Lest We Forget... A Brief Timeline of China's Modern History
  • 3 hours Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 11 hours Democrats and Gun Views
  • 1 hour How OPEC and OECD play their role in setting oil price in light of Iranian oil sanction ?? Does the world agree with Iran's oil sanctions ???
  • 12 hours Visualizing US Oil & Gas Production (Through May 2019)
Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

Russia Gains Upper Hand In Asian Oil War

The Saudi-led OPEC cuts may have supported oil prices and reduced market volatility, but they have also opened the door wide to rival crude grades flowing into the most prized market for the Middle Eastern producers: Asia.

Reduced supplies by OPEC resulted in higher prices for Middle Eastern crude benchmark Dubai and a narrower Brent/Dubai spread, which made the shipment of Brent-price-linked crude grades to Asia profitable.

On the other hand, independent refiners in China – the so-called teapots—not bound by long-term supply contracts with Saudi Arabia—have been replacing in the early weeks of this year the now-expensive Middle Eastern grades with Urals, a Russian grade with qualities similar to the Oman crude grade and with even better refining economics, according to traders.

Urals, which is priced against the Brent, is now a business-feasible opportunity for smaller Chinese refiners, after the rise in Middle Eastern benchmarks.

By including the Urals grade to its exports to China, Russia may now be able to take advantage of the OPEC cuts and further extend its lead over Saudi Arabia as China’s top oil supplier.

Chinese refinery demand helped Russia to outstrip Saudi Arabia to take the top spot in crude exports to China last year. Russia’s exports jumped 25 percent annually to 1.05 million bpd in 2016, compared to Saudi Arabia’s shipments of 1.02 million bpd, inching up just 0.9 percent. Related: How Long Can The Permian Craze Continue?

Since the supply-cut deal took effect on January 1, the Saudis have had to strike a delicate balance between leading the OPEC cuts to show the world (and OPEC itself) that it is cutting production in earnest, and maintaining supply to buyers across the world, including its mainstay market: Asia.

In early January, the Saudis were said to have cut February supplies to some clients in China and southern Asia, but keeping full volumes flowing to its vital Japanese and South Korean markets. Saudi Arabia’s term supplies to Asia for February were reportedly down by 5-10 percent, according to Bloomberg. Still, OPEC’s largest producer was cutting from heavier grades and shipping lighter varieties in order to keep up with the competition of supplies from West Africa and the U.S., which had become viable with the narrower Brent/Dubai and WTI/Dubai spreads.

The reduced OPEC supply and the more expensive Middle Eastern crude relative to WTI and Brent are helping not only Russia’s Urals to head to previously unprofitable destinations such as China. They are also raising Asia-bound U.S. shipments of crude oil.

China may also receive its first-ever Eastern Canadian crude en route into the Caribbean and on to China, Platts quoted crude traders as saying earlier this month. Related: Record High Oil Inventories Crush Hopes For $70 Oil

Still, the Saudis are not just letting rivals chip away at their prized Asian markets. Following some cuts in February deliveries to some buyers in China and southern Asia, Saudi Aramco is said to be shipping all the volumes refiners in Asia had asked for March. According to Bloomberg, at least seven refiners in North Asia and two in Southeast Asia would be getting full volumes contracted for March.

While Saudi Arabia tries to protect its market share in Asia from rival U.S. Gulf coast, North Sea and Africa shipments, the fact that Russia’s Urals grade is making its way to independent Chinese refineries shows how oil exporters and traders take every business opportunity of arbitrage windows to monetize on OPEC’s much-hyped production cuts.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play