Saudi Arabia's crude oil exports to China are expected to decline for the third consecutive month in July, according to industry sources. The projected dip comes amid planned maintenance at Chinese refineries and a shift by some refiners towards cheaper alternatives.
Trade sources estimate that Saudi oil shipments to China will fall to around 36 million barrels in July, down from 39 million barrels in June. This follows a previous decline from 45 million barrels exported in May. The lower purchases by China, the world's largest crude importer, pose a challenge for Saudi Arabia, the world's top oil exporter, as it strives to retain its market share.
Several factors are contributing to the anticipated decrease in Saudi oil flowing to China. Firstly, routine maintenance at Chinese refineries is expected to curb their crude intake in July. This temporary reduction in processing capacity limits the amount of crude oil that can be brought in.
Secondly, some Chinese refiners are reportedly opting for competitively priced oil sources other than Saudi Arabia. This shift in buying preferences comes as Saudi Arabia adjusts its official selling price for crude oil sold to Asia. In an effort to remain competitive, the state-owned oil giant Saudi Aramco reduced its prices for July deliveries by $0. 50 per barrel compared to June prices.
The news of declining Saudi crude oil exports to China aligns with broader trends in the global oil market. Oil prices have experienced significant volatility in recent months due to various factors, including the ongoing war in Ukraine, supply chain disruptions, and post-pandemic economic recovery. This volatility has incentivized some refiners to seek out the most economical sources of crude oil.
The decrease in Saudi oil flowing to China presents an opportunity for other major oil producers to potentially increase their exports to the Asian nation. Russia, another key oil supplier to China, could look to capitalize on this situation by offering competitive prices and ramping up its crude oil sales to China.
Looking ahead, the future trajectory of Saudi oil exports to China will depend on several factors. The completion of maintenance at Chinese refineries will likely lead to a rise in crude oil demand in the latter part of the year. Additionally, fluctuations in global oil prices will continue to influence buying decisions by Chinese refiners. Saudi Arabia's ability to retain its market share in China will hinge on its responsiveness to these dynamics, including potentially adjusting its pricing strategies and crude oil blends to better suit the needs of Chinese refiners.