Saudi imports of fuel oil from its OPEC+ partner, Russia, jumped to a record-high in June as the Kingdom looks to burn more fuel oil for summer power demand, at the expense of crude oil, amid the production cuts, analysts and traders have told Reuters.
Last month, the world’s largest crude oil exporter, Saudi Arabia, imported a record volume of 193,000 barrels per day (bpd) of fuel oil from Russia, a tenfold surge compared to a year ago, according to data from analytics firm Kpler cited by Reuters.
Analysts believe there is a link between the record fuel oil imports from Russia and the Saudi pledge to cut production. To keep crude exports, Saudi Arabia is prioritizing fuel oil power generation, according to Royston Huan, fuel oil and feedstocks analyst at Energy Aspects.
“We believe there is a linkage to the cuts, as Saudi Arabia will be incentivized to prioritize their crude exports, therefore prioritizing fuel oil utilities burn over crude oil burn,” Huan told Reuters.
Russia began exporting fuel oil to Saudi Arabia and other Middle Eastern countries this year, as its products are now embargoed in Europe, the previous top market for Russian crude and petroleum products.
For Saudi Arabia, cheap Russian imports leave more crude available for exports. Saudi Arabia and the UAE, traditional Middle Eastern allies of the United States, have not shied away from importing, storing, trading, or re-exporting Russian fuels despite American efforts to persuade them to join a crackdown on Russian attempts to evade the Western sanctions on its oil.
Saudi Arabia is also said to be making money from diesel trading after the EU embargo on Russian fuels, as the world’s top crude exporter is now importing record volumes of cheap diesel from Russia and exporting record levels of its own diesel to the higher-priced Asian market in the Singapore hub.
By Tsvetana Paraskova for Oilprice.com
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For Russia, its exports of crude and petroleum products continue to break records. Moreover, Saudi and UAE imports of its petroleum products are enabling it to undermine the EU’s ban on the supply of these products to Europe.
Russian exports of petroleum products are still reaching Europe in a circuitous way via India, China and Singapore who are buying increasing volumes of Russian crude, refining it and then exporting it to the EU and even the United States.
This is a win-win situation for both Saudi Arabia and Russia.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert