Contender: Saudi Arabia nabs new China oil demand, challenges Russia's top spot
SINGAPORE/BEIJING/DUBAI (Reuters) - Saudi Arabia is set to expand its market share in China this year for the first time since 2012, with demand stirred up by new Chinese refiners pushing the kingdom back into contention with Russia as
Saudi Arabia, the biggest global oil exporter, has been surpassed by Russia as
Now fresh demand from new refineries starting up in 2019 could increase China’s Saudi oil imports by between 300,000 barrels per day (
Saudi Aramco said last week it will sign five crude supply agreements that will take its 2019 contract totals with Chinese buyers to 1.67 million
“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,” Rystad Energy analyst Paola Rodriguez-Masiu said.
Saudi Arabia has already gained ground this year. China imported 1.04 million
Saudi’s market share in China could jump to nearly 17 percent next
China imported 1.39 million
“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,”
NEW CUSTOMERS
The biggest boost to Saudi exports to China comes from contracts inked with new refineries starting up this year and next, owned by companies other than state oil giants Sinopec or PetroChina.
The contracts include 130,000
Saudi Aramco has also agreed to increase Sinochem Corp’s supplies, which will be processed at its Quanzhou and Hongrun refineries.
Sinopec, PetroChina
Beijing-based consultancy SIA Energy expects Saudi crude imports to rise by just 300,000
“We expect lower Saudi crude demand from Hengli and Rongsheng as it is unlikely for them to run their refineries at full rate in 2019,” analyst Seng Yick Tee said.
Zhejiang Petrochemical is majority-owned by Rongsheng Holdings.
Still, a source familiar with Aramco’s export plans said there is a tremendous appetite from China’s independents, and that it needed to be more aggressive in its marketing strategy.
The state oil company did move more swiftly to seal the most recent deals than it used to in the past, industry sources said.
Aramco’s first deal with Hengli was to supply 20 million barrels of crude, about 55,000
“Hengli executed the 2018 deal nicely, which helped build trust,” he said.
Hengli is designed to process 90 percent Saudi crude, a mix of Arab Medium and Arab Heavy, while the remaining 10 percent is Brazilian Marlim crude. Rongsheng’s plant is identical to Hengli, the industry sources said.
The sources spoke on condition of anonymity.
Aramco is also supplying PetroChina’s refinery in China’s southwestern Yunnan province with about 4 million barrels a month of crude via a pipeline from Myanmar between July and November, Eikon data showed, although sources said talks for Saudi Arabia to acquire a stake in the refinery have stalled.
Saudi Aramco’s Chief Executive Amin Nasser said on Monday the company will push to expand its market share in China and is still looking for new refining deals there despite OPEC’s likely limits on output next year.
MAY CUT OIL EXPORTS TO U.S.
Saudi Aramco will supply up to 70 percent of the oil required at its 300,000-
This comes as the Organization of the Petroleum Exporting Countries (OPEC) is discussing production cuts of as much as 1.4 million
Between balancing global supplies and increasing market in Asia, Aramco may decide to “forgo market share in other markets like the United States, where the surge in domestic production will make it difficult for the Saudis to retain market share anyway,” Rystad’s Rodriguez-Masiu said.
Saudi’s oil shipments to the United States have risen recently to above 1 mln
“You need to lessen the inventories in the U.S.,” the source said, adding that Aramco will likely divert oil supply from the United States to Asia to meet rising demand there.
A Chinese oil executive said: “China is where the demand growth is. The Saudis are very wise to capture this market.”
Reporting by Florence Tan in SINGAPORE, Chen Aizhu in BEIJING and Rania El Gamal in DUBAI; Editing by Tom Hogue
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