Saudi Crude Oil Exports to China Expected to Drop in February Amid Price Hike

Saudi Arabia's crude oil exports to China are projected to decline in February following a price increase by state-owned oil giant Aramco. This marks the first price hike in three months, signaling a shift in the supply dynamics.

According to a Reuters report citing unnamed trade sources, Saudi oil shipments to China are expected to stand at 43.5 million barrels in February, down from 46 million barrels in January. This reduction comes as Aramco raises its prices for February deliveries, adjusting its strategy for different Chinese refineries. Specifically, deliveries to CNOOC and PetroChina will see a cut, while supplies to Sinopec and Sinochem are set to increase.

Earlier this week, Aramco announced a $0.60 per barrel increase in the price of its flagship crude grade, Arab Light, pushing the price to a premium of $1.50 per barrel over the Oman/Dubai average. This hike is more than the $0.10 per barrel increase anticipated in a Bloomberg poll of traders and refiners. While Aramco typically does not comment on its price adjustments, this move sets the tone for other Middle Eastern oil producers and reflects the ongoing market shifts.

The price hike comes amidst broader market conditions where OPEC+ continues to control supply, and Western sanctions on tankers carrying crude from Iran and Russia have resulted in a tightening supply. Saudi Arabia, as a leading member of OPEC+, has withheld production to support oil prices, contributing to a bullish market.

OPEC+ and Regional Supply Reductions

In December, OPEC+ output likely decreased, with a Reuters survey estimating a 50,000 barrels per day (bpd) reduction. This brought the cartel's total output to 26.46 million bpd. Significant reductions were seen in the UAE, where field maintenance cut output by 90,000 bpd, and in Iran, where production dropped by 70,000 bpd.

These supply constraints, combined with rising geopolitical tensions and regional uncertainties, have been driving prices up, with Middle Eastern benchmark prices rallying as a result.