China has significantly reduced its imports of crude oil from Saudi Arabia in recent months, a recent report has revealed, which notes that the Saudis are no longer among the top suppliers of crude to China.
The analytic report published by Oilprice.com shows that Chinese oil purchasers, including state-owned oil companies and independent refiners, imported a total 1.26 million barrels per day (bpd) of oil from Saudi Arabia in July, a record low that is largely due to high benchmark prices set by Persian Gulf Arab producers for orders placed in April.
For two years, Saudi Arabia has been either the number-one or number-two oil supplier to China, the world’s top oil importer.
However, a slump in global oil prices that began in March and continued into April, mainly a result of a price war between Saudi Arabia and Russia as well as the massive decline in demand for oil because of the coronavirus pandemic, pushed many Chinese buyers to take advantage of the ultra-cheap oil and stock up their reserves.
That caused imports into China from the Americas to surge at the expense of Saudi Arabia. In fact, imports from the United States and Brazil increased in July, showing that Chinese preferred supplies that took almost 45 days to reach the country from the Americas over the cargoes on the shorter route between the Middle East and China.
The report predicted that the Saudis will have to wait for months to be able to recapture their previous share of the Chinese market. It cited economic data as showing that supplies of crude from the US and Brazil into China would continue to be strong in August and even in September as the Chinese buyers have already chartered tankers for the future deliveries. LINK
At the same time as it is reportedly reducing purchases from the Saudis, in terms of more long term trends China has been steadily increasing its purchases of oil and gas from Russia, Iran and Iraq to unprecedented levels. Moreover, in each case the purchases have been locked into long term arrangements that signify that while the current shift away from Saudi oil may have been decided based on current conditions, it is also part of a long term shift in Chinese strategy and relations that involves replacing Saudi oil purchases with other suppliers, although as it traditionally does in its relations with other countries China will continue to maintain cordial relations with the Saudis unless there is a specific dispute that cannot be resolved by quiet diplomacy.
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