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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. 

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What Explains China’s Thirst For Saudi Oil

China stepped up purchases of Saudi oil in the first four months of this year as a private refiner is raising crude intake from the Kingdom that has secured term deals to grab more market share in the world’s top oil importing market.

Hengli Petrochemical, a privately held refiner, has stepped up purchases of Saudi crude oil for April and May and is close to ramping up its new 400,000-bpd refinery to full capacity later this month, Reuters reported on Monday, citing ship-tracking data and officials at Hengli Petrochemical.

The new Chinese refinery, which started trial runs at the end of last year, is set to import between 194,000 bpd and 258,000 bpd of Saudi Arabian crude oil this month, after having bought 258,000 bpd in April, according to one of Reuters’ sources.

Several Hengli Petrochemical executives and sources told Reuters that the refinery is expected to reach full capacity later in May.

At the end of 2018, Hengli Petrochemical and Saudi Arabia’s oil giant Aramco signed a supply agreement under which the Chinese refiner would be buying 130,000 bpd of Aramco’s oil in 2019.

Also thanks to the supply agreements with Hengli and with another new refinery, Rongsheng Petrochemical, Saudi Arabia boosted its supply to the Chinese market in the first four months of this year. Related: Pipeline Bottlenecks Cost Canadian Producers $20 Billion

According to Refinitiv trade flow data, Saudi Arabia’s exports to China jumped to average 1.37 million bpd between January and April, from just above 1 million bpd in the first four months of 2018. 

The higher sales volumes on the Chinese market helped Saudi Arabia to oust Russia from the top spot of China’s oil suppliers for a second month in a row in March, according to Reuters data.

Earlier this year, Saudi Aramco—which is increasingly looking to lock in future oil demand in Asia’s downstream markets—signed an agreement to buy 9 percent in Zhejiang Petrochemical’s 800,000-bpd integrated refinery and petrochemical complex.

“Saudi Aramco’s involvement in the project will come with a long-term crude supply agreement and the ability to utilize Zhejiang Petrochemical’s large crude oil storage facility to serve its customers in the Asian region,” Aramco said in February 2019.

By Tsvetana Paraskova for Oilprice.com

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