Saudi Arabia’s crude oil supply to China will likely decrease in March compared to the previous month, trade sources told Reuters on Tuesday.
This comes after the kingdom increased its prices to the highest in over two years.
State-owned oil company Saudi Aramco will decrease its oil shipments to China for the second consecutive month.
Supply quotas to China
The company plans to ship approximately 41 million barrels of oil to China in March, according to the report.
This represents a decrease from the 43.5 million barrels shipped in February, and continues a downward trend in Aramco’s oil allocations to China.
The reasons for this decrease have not been specified, but may be related to changes in demand, pricing, or other market factors, Reuters reported.
Trade sources quoted by Reuters said Aramco will increase its crude supply to PetroChina and private refiner Shenghong Petrochemical in March.
During the same period, the Fujian refinery, a joint venture between Chinese state major Sinopec and Aramco, will be decreasing its crude oil intake.
Last week, Aramco, the Saudi Arabian oil company, significantly raised the prices for its crude oil shipments scheduled for March.
This price hike was directed towards buyers across Asia, including major economies like China and India, as well as other regions globally.
Rise in prices
Saudi Aramco had increased the official selling price (OSP) for its flagship Arab Light crude oil.
The price was raised by $2.40 to $3.90 per barrel above the Oman/Dubai benchmark average.
This was the highest price increase since December 2022 and signified a significant development in the global oil market.
The Oman/Dubai benchmark average is a commonly used reference price for crude oil in the Middle East.
The increase in the OSP for Arab Light crude reflects a tightening oil market and potentially rising demand for oil globally.
This move indicated a tightening of the global oil market and could lead to higher fuel costs for consumers in the affected regions.
It also comes amid shortages in crude oil coming from Russia after the US had imposed fresh sanctions in January.
Both India and China had faced difficulties in sourcing oil from Russia, which had driven up demand for crude barrels from the Middle East.
OPEC’s decision in focus
Meanwhile, the Organization of the Petroleum Exporting Countries and allies, the group of oil-producing countries that is responsible for approximately half of the global oil supply, is expected to maintain its current production cuts through the first quarter of the year.
The group is scheduled to raise production from April by unwinding some of its voluntary output cuts of 2.2 million barrels per day.
The move to hold production levels steady in the near term is likely aimed at supporting oil prices, which have been volatile in recent months due to a range of factors including the ongoing global pandemic and its impact on demand.
Saudi Arabia is the de-facto leader of the OPEC+ cartel.
China’s 2024 crude oil imports from Saudi Arabia, their second-largest supplier after Russia, decreased 8.5% from 2023 to 78.64 million metric tons (1.57 million barrels per day), according to Chinese customs data.
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