The World’s Top Oil Importer Is Turning Its Back On Saudi Arabia

In recent months, the world’s biggest oil exporter, Saudi Arabia, has lost market share in China to the United States as the world’s top oil importer has boosted imports from America and reduced purchases from the Kingdom.  

record volumes of crude oil in recent months, taking advantage of the lowest crude prices in two decades in April stock up on dirt-cheap oil.  ” data-reactid=”13″>China has imported record volumes of crude oil in recent months, taking advantage of the lowest crude prices in two decades in April stock up on dirt-cheap oil.  

In their bargain-hunting for low-priced oil, Chinese state oil giants and independent refiners alike snapped up cheap U.S. cargoes in April, which were loaded in May, started to arrive in China in June, and set records in July.  

hitting all-time highs in May and June thanks to the bargain prices the Saudis offered in the brief price war for market share in March and April – slipped in July as availability of crude from the Middle East shrank after May with the OPEC+ cuts. ” data-reactid=”19″>At the same time, Chinese oil imports from Saudi Arabia – after hitting all-time highs in May and June thanks to the bargain prices the Saudis offered in the brief price war for market share in March and April – slipped in July as availability of crude from the Middle East shrank after May with the OPEC+ cuts. 

Chinese refiners were opportunistic buyers of crude in March and April, and given the shorter tanker travel time between the Middle East and China, compared to the U.S.-China route, Chinese imports of crude oil from Saudi Arabia slumped as early as in July from the record highs of the previous two months. Meanwhile, the roughly 45-day route from the U.S. to China means that the cheap American crude oil loaded in May started arriving in China en masse in July. 

Saudi Arabia slipped to the third spot on the list of China’s key oil suppliers behind Russia and Iraq—the first time in two years that the Kingdom has not been the number-one or number-two oil supplier to the world’s top oil importer. ” data-reactid=”21″>Last month, Saudi Arabia slipped to the third spot on the list of China’s key oil suppliers behind Russia and Iraq—the first time in two years that the Kingdom has not been the number-one or number-two oil supplier to the world’s top oil importer. 

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The OPEC+ production cuts have surely played a role in Chinese buyer preferences. The lower exports from the Middle East tightened the availability of those grades, pushing up the price of the Middle East Oman/Dubai benchmark, against which the Gulf oil producers price their oil going to Asia. 

soared by 139 percent year over year, to around 864,200 bpd, placing America at the fifth place among Chinese suppliers. ” data-reactid=”24″>While Saudi Arabia’s oil exports to China in July declined by 23.4 percent to 1.26 million barrels per day (bpd) – making Saudi Arabia China’s third-largest oil supplier – Chinese imports of U.S. crude oil soared by 139 percent year over year, to around 864,200 bpd, placing America at the fifth place among Chinese suppliers. 

2.16 million bpd of Saudi crude, a record high. 

show. ” data-reactid=”26″>Saudi Arabia has lost market share in China not only to the U.S. but also to Brazil, estimates from Reuters columnist Clyde Russell show. 

The key reason for this development was similar to the reason for the high imports from the U.S.—China going bargain-hunting for ultra-cheap crude oil when prices crashed in March and April, courtesy of the Saudi-Russian oil price war, among other, pandemic-related, things.

had chartered tankers that could deliver as much as 37 million barrels of crude oil from the United States in September—a possible record high. ” data-reactid=”28″>Data from Refinitiv Eikon suggests that China’s U.S. crude oil imports will continue to be strong in August, while the visibility for September and afterwards is somewhat lower, although a recent Bloomberg report suggested that China had chartered tankers that could deliver as much as 37 million barrels of crude oil from the United States in September—a possible record high. 

is not ramping up its crude oil exports just yet, despite the fact that the OPEC+ group is easing the production cuts by a collective 2 million bpd as of August 1. ” data-reactid=”29″>In August, Saudi Arabia is not ramping up its crude oil exports just yet, despite the fact that the OPEC+ group is easing the production cuts by a collective 2 million bpd as of August 1. 

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After September, the Saudis could claw back some market share lost to the U.S. (and Brazil) over the past two months, as the opportunistic Chinese buying of American oil may have come to an end, Reuters’ Russell argues. 

Despite increased purchases of U.S. oil in recent months, analysts do not believe that China’s primary motivation for this has been trying to fulfill its pledge in the Phase 1 U.S.-China trade deal to buy much more U.S. energy products. The record-high monthly imports of oil from America were instead the result of the bargain-hunting for cheap oil during the March-April price rout. 

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