Saudi Aramco will deliver crude oil to Chinese refiner Huajin Chemical Industries under a new deal-a first for the two companies, sources in the know told Reuters.
Aramco will supply light crude that will enable Huajin to expand its naphtha output, which in turn will help it to grow its petrochemicals output, the sources said. The deal comes a few months after Russia overtook Saudi Arabia as China's largest supplier of crude oil.
A data analysis from S&P Global Platts released earlier today revealed that Chinese refineries' throughput in December averaged 11.31 million bpd, up by 3.6 percent on December 2015 and a record high. Imports of fuels stood at an average 1 million barrels per day. Apparent demand for crude in the Asian nation, as based on official statistics, was also up, by 2.3 percent to 11.69 million tons.
The current quarter is expected to see higher demand for fuels, after the end of maintenance season.
Saudi Arabia is a long-term supplier of China's state-owned energy majors. This was what prevented it from keeping its place as #1 supplier: growing demand for crude oil from the so-called teapot refineries-which are much more flexible in their contractual terms-helped Russia to get ahead.
Related: Qatar Petroleum Continues To Climb Past The Oil Majors
Put in a position to catch up, and with a much-advertised IPO on the way, Aramco will naturally be looking for more opportunities to market its product. As the world's second-largest consumer of crude, China is an obvious target market.
China's total oil imports last year hit a new high, with foreign oil satisfying more than 64 percent of demand - a trend that is seen to continue over the next four years. In the 2015- 2020 five-year plan, total imports are projected to increase by 17 percent, mostly on the back of falling domestic output, itself a result of maturing fields and high production costs.
This year alone, according to state giant CNPC, domestic demand for crude will hit 12 million barrels daily, which would necessitate a 5.3-percent increase in imports.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More