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Having slashed Saudi crude imports for May by 40 percent, China’s Sinopec—the largest oil refiner in Asia—will continue to cut imports of the flagship Saudi crude grade in June and July, as the prices for other Middle Eastern grades are more favorable, two executives at Sinopec’s trading arm Unipec told Reuters on Tuesday.
Earlier this month, Unipec executives said that Sinopec had requested 40 percent lower Saudi oil import loadings for the month of May and that the request had been approved. Sinopec asked for lower Saudi oil imports after Saudi Aramco unexpectedly raised the official selling price (OSP) of its flagship Arab Light crude grade to Asian customers for May loadings.
Now it looks like Sinopec has decided to continue to cut Arab Light imports, although the executives didn’t elaborate on how much the reduction in June and July would be.
“Arab Light’s economics are not as good as oil from other Middle East producers. So our refineries have reduced their consumption and we will continue to cut,” one of the Unipec executives told Reuters, adding “There’s no reason to use the oil if the [Saudi] OSPs are high and economics do not improve.”
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According to two traders who spoke to Reuters, Saudi Aramco is likely to raise its OSP for June loadings by at least US$0.50 a barrel to reflect higher April prices of Dubai crude—the benchmark against which the Saudis price their oil for delivery in Asia.
Sinopec’s 40-percent cut in Saudi imports for May “seems unprecedented”, analysts said, because it is way off the typical so-called ‘operational tolerance’ of plus/minus 10 percent off volumes under the long-term supply deals that the Saudis have with Chinese refiners.
Chinese crude oil imports in March jumped to their second-highest on record, at 9.2 million bpd, supported by robust refining margins and ample Chinese government quotas. Last month, Russia held onto its no.1 spot as China’s single biggest crude supplier for the thirteenth month running, after it ousted Saudi Arabia from the top spot last year. Chinese imports of Russian oil jumped 23.6 percent annually to 1.36 million bpd in March. Saudi Arabia came in second, selling 1.09 million bpd, up 1.2 percent on the year, but down from 1.2 million bpd in February.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.