Saudi Arabia to compete with Russia for China’s increased oil imports
Last week, Saudi Aramco announced signing several crude supply agreements that would considerably increase its exports to China in 2019. Given that Russia's supplies are expected to stay at this year's rate, the Saudis can regain the position of China's top crude supplier lost in 2016.
Saudi Arabia is set to expand its market share in China this year for the first time since 2012, says Reuters. An increased demand from new Chinese refiners is spurring the kingdom's rivalry with Russia for the world's largest oil buyer. In the past two years, Russia has been China's top crude supplier due to a new pipeline and demand from private 'teapot' refiners. However, new refineries starting up in 2019 can help Saudi Arabia boost its supplies to China by between 300,000-700,000 bpd, according to analysts.
In the first ten months of 2018, China imported 1,04 million bpd of Saudi crude, which is equivalent to 11,5% of total Chinese imports. Some analysts expect that Saudi's market share in China can jump to nearly 17% next year. The kingdom signed several supply deals with new refineries expected to start up in 2018 and 2019, while large state companies, such as Sinopec, PetroChina and China National Offshore Oil Corporation, have kept their Saudi volumes for next year unchanged. ''With the recent crude oil supply agreements and potential increase of refinery capacity, the Saudis could overtake the Russians and reclaim [the] crown as the biggest crude exporter to China,'' believes Paola Rodríguez-Masiu, an analyst at Rystad Energy consulting.
As for Russia, it accounted for about 15% of total Chinese imports in January-October. Last year, Russia's market share totalled 14% or 1,2 million bpd. ''We expect Chinese imports of Russian crude to remain at a similar rate in 2019, as a large share of these Russian barrels are imported via pipeline,'' said Mark Tay, an analyst at Refinitiv. Beijing-based SIA Energy consultancy expects Saudi Arabia's market share to rise to 13,7%, which is still behind Russia.
Nonetheless, industry sources claim that Saudi Aramco moved more swiftly to seal the most recent deals than it used to in the past. According to Saudi Aramco's Chief Executive Amin Nasser, the company will push to expand its market share in China and is still looking for new refining deals in the country despite OPEC's intention to limit oil output next year. Given tremendous appetite from China's independents, the kingdom has every chance to regain its position of the People's Republic's top crude supplier.