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Goldman Sachs Slashes Oil Price Forecast By $10

Goldman Sachs Slashes Oil Price Forecast By $10

Goldman Sachs has slashed its…

Asia Buys Less Saudi Crude As COVID Restrictions Return

Some Asian refiners have nominated lower than usual volumes of crude oil from Saudi Arabia in September as authorities in China and the rest of Asia have re-imposed restrictions to fight the Delta variant surge, officials at four refineries told Bloomberg.

Aramco has notified those four refineries—one in Southeast Asia and three in Northeast Asia—that it would ship the crude they had asked for, the officials told Bloomberg.

China Petroleum & Chemical Corporation, or Sinopec, is expected to reduce refinery run rates by up to 10 percent at some of its facilities amid renewed travel restrictions in China to fight a COVID wave, a commodity research analyst told Bloomberg in an interview on Tuesday.

According to Jean Zou, an analyst at Shanghai-based commodities researcher ICIS-China, China’s largest refiner Sinopec is likely to reduce run rates at some refineries by between 5 percent and 10 percent in August, compared to previous plans for this month’s throughput.

China imposed in the past two weeks widespread restrictions on travel in major cities, including Beijing, to contain a resurgence in COVID cases of the Delta variant. As with the previous outbreak, which China stifled with a complete lockdown, the rise in infections is affecting movement and, consequently, fuel use.

The 20 biggest airports in China saw in the past week the number of flight departures falling to just 40 percent of the levels from 2019, BloombergNEF said earlier this week.

“The wide decline in traffic will take a heavy toll on road fuel consumption, which will force producers like Sinopec and PetroChina to reduce refining run rates,” Luxi Hong, a Beijing-based analyst with BNEF, said in a note carried by Bloomberg.

Refiners in Asia are also struggling with below-average margins, especially after Saudi Aramco raised last week its official selling prices for crude oil loading for Asia in September to the highest premiums to benchmarks since February 2020.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on August 12 2021 said:
    The main reason behind a reduction of crude imports from Saudi Arabia is that China has been buying discounted Iranian crude under the 25-year strategic cooperation agreement signed on 25 March 2021 estimated at 1.0 million barrels a day (mbd).

    A small resurgence of new COVID cases would hardly impact on Chinese oil imports. One has to remember that Chinese oil imports even at the height of the pandemic in 2020 and in the absence of vaccines broke all previous records and averaged 11.67 mbd or 14% higher than 2019.

    China’s crude oil imports in the first half of 2021 were already 2% higher than 2020 meaning that on average China has been importing 11.9 mbd. I am sure that imports will average higher than 12.0 mbd by 2021.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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