Saudis keen to compete for market share in China, Asia’s biggest oil consumer
Saudi Arabia has moved back up a notch in the race to supply oil to China, signalling its eagerness to compete for market share in Asia’s biggest crude consumer.
The world’s largest oil exporter shipped almost 4 million tonnes of crude to China in July, the equivalent of 946,000 barrels a day, a 3.7 per cent increase from a month earlier, according to data released on Wednesday by the General Administration of Customs. That puts the producer second only to Russia as the Asian nation’s top supplier after languishing in third over the last four months.
Competition over China, which has topped the US so far in 2017 as the world’s biggest importer, intensified since last year’s deal between the Organisation of Petroleum Producing Countries and its allies to curb supplies in a bid to raise oil prices. Saudi Arabia, which has borne the brunt of the reductions, may struggle to maintain its place after saying last month it would deepen export cuts from August in a show of commitment to eliminate a global glut.
“Saudi Arabia, which is traditionally the biggest seller to China, certainly wants to keep stable supplies to its largest buyer in Asia even though it’s cutting output at home,” said Li Li, analyst with Shanghai-based commodities researcher ICIS-China. “China has the priority seat when it comes to buying oil from Saudi Arabia. China has the same feeling, Saudi oil is still a very reliable source.”
Saudi Arabia and Russia have been in a tussle over the top spot for much of this year, with Russia holding the lead since March. Though Saudi shipments increased month-on-month, they slipped 0.8 per cent from a year ago. Meanwhile, purchases from Russia jumped 54 per cent year on year to 4.97 million tonnes.
Imports from the US, OPEC’s biggest threat in reducing the global oversupply, were at 738,094 tonnes in July, down 33 per cent from a month earlier, though up from nothing a year ago. Purchases from Iraq rose by 16 per cent from last year to 3.64 million tonnes, keeping the country as the fourth-largest seller. Shipments from Angola, China’s third-biggest supplier, fell 17 per cent on year to 3.91 million tonnes.
“For the foreseeable future, Russia, Saudi Arabia and Angola will be the top suppliers in turns,” Li said. “US shipments will also pick up, but it will take a while for it to be a market share threat for those three.”