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Column: Chinese crude demand rises, but expensive Saudi oil less desirable: Russell | – #Column #Chinese #crude #demand #rises #expensive #Saudi #oil #desirable #Russell

LAUNCESTON, Australia, Feb 9 (Reuters) – An unexpected rise in the price of Saudi Arabian crude for March cargoes was seen by the market as a bullish signal that Chinese demand, which has reopened and stimulated the world’s biggest importer, is picking up. its economy.

There are certainly signs of a revival in China’s fuel demand, with passenger flights and road traffic rising strongly, suggesting the country’s massive manufacturing sector is picking up the pace of processing.

It looks quite possible that China will import more crude oil in the coming months, but the question for Saudi Aramco ( 2222.SE ) and the wider oil trading community is whether they will buy relatively expensive Saudi oil or whether Chinese refiners will be successful. source of cheaper alternatives.

State-controlled oil producer Aramco has announced the official selling price (OSP) per barrel of its advanced Arab Light blend for Asian customers for March cargoes. 20 regional benchmark Oman/Dubai by increasing cents prices increased to $2.00 compared to

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The increase defied refiners’ expectations of a 30-cent-per-barrel cut in OSP for cargoes loaded in March, amid signs that actual physical demand in China has lagged on the upside.

If Chinese physical demand accelerates from March, it could prove that Aramco made the right call in raising OSP.

But it raises the possibility that Saudi oil will be less in demand not only in China but also by refiners in the rest of the continent, which accounts for two-thirds of the kingdom’s exports.

Saudi oil, usually sought by refiners or by Aramco offer It is sold on the basis of long-term contracts that allow changes in the volumes.

It is global to Saudi Arabia prices aims to raise prices, allowing refiners to limit exports while also allowing refiners to take smaller volumes if they see reduced demand for refined products or if refining margins make it uneconomic to refine crude oil.

Assuming China’s rise story is valid and refiners April and they want to increase arrivals in May, when cargoes loaded from Saudi Arabia in March will reach Chinese ports.

By increasing the OSP for cargoes loaded in March, Aramco ensured that its crude was relatively more expensive than other grades.

This puts Chinese refiners on the spot offer which gives incentives to increase the volume of other producers.

These include Angola and Nigeria, USA and include West African producers such as Brazil, but most notably from Russia.

China is already receiving increasing volumes from Russia, so much so that Russia has supplanted Saudi Arabia as China’s main supplier in the past few months.

The reason for this, Europe and as other buyers such as Japan halted imports as part of efforts to punish Moscow for its February 24 invasion of Ukraine Russia crude oil now at steep discounts offer is being

According to Refinitiv Oil Research, China imported 2.03 million barrels per day (bpd) from Russia in January and 1.52 million barrels in December.

This is Russia january Importing 1.77 million barrels per day from the kingdom in 2018, it became China’s largest supplier, surpassing Saudi Arabia.

Chinese refiners are likely to increase imports, as do refiners in India, Asia’s second-largest oil importer, primarily Russia they will turn to crude oil.

FUEL

Another factor to consider is that China’s independent refiners may switch to importing fuel oil instead of crude oil, especially since February 5 Russian oil products Europe Because it is banned by the countries of the Union.

Although China is a net exporter of refined fuels, some refiners are processing fuel oil into diesel and gasoline they have the opportunity to turn into high-value products.

Data from Kpler Commodity Advisors China january The flow of fuel oil from Russia to China increased sharply, which reached a record level, showing that it imported 3.89 million barrels of oil from Russia.

Kpler Russian fuel oil sea to China way It is preparing to exceed this indicator this month by monitoring its arrival at 6.75 million barrels.

It seems that China already buys more crude oil and fuel oil from Russia.

The question then becomes, if China’s growing demand exceeds what it can get from Russia, where will it turn next?

USA crude oil is currently cheaper than Middle Eastern oil, which tends to rise in tandem with moves in Saudi crude oil prices.

China already USA there are signs that its appetite for oil is growing, with Kpler estimating March arrivals at 23.61 million barrels, up from 6.76 million barrels in February and 8.65 million barrels in January.

China’s imports from Brazil were estimated by Kpler at 24.1 million barrels for March, up from 21.06 million barrels in February, the highest in two years.

The overall picture that emerges is that if Aramco expects strong growth in Chinese crude demand, it should expect a fantastically strong result if it also expects to sell increasing volumes of its high-priced oil.

Edited by Jacqueline Wong

Our standards: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They are Confidence It does not reflect the views of Reuters News, which is committed to its principles of integrity, independence and freedom from bias. Clyde Russell

Thomson Reuters

Clyde Russell is Asia Commodities and Energy Specialist at Reuters. He has been a journalist and editor for 33 years, covering everything from wars in Africa to the resource boom and its current struggles. Born in Glasgow, he has lived in Johannesburg, Sydney, Singapore and now divides his time between Tasmania and Asia. He writes on trends in commodity and energy markets, with a special focus on China. Before becoming a financial journalist in 1996, Clyde covered civil wars in Angola, Mozambique and other African hot spots for Agence-France Presse.

2023-02-09 09:41:45
Source – reuters

Translation“24 HOURS”



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