Saudi Crude to China to Surge in May After Price Fall, Sources Say

SINGAPORE: Sources indicated on Friday that Saudi Arabia's crude oil exports to China will increase in May compared to the previous month due to a significant price reduction by the kingdom that is driving demand. Saudi Aramco (2222.SE), the state oil company, will deliver approximately 48 million barrels to China in May, according to a report on allocations to Chinese refiners, an increase from 35.5 million barrels in April. According to sources, Chinese state giant Sinopec (600028.SS), China National Offshore Oil Corp (CNOOC), and private refiner Shenghong Petrochemical will all be importing additional Saudi crude in May.

Aramco and CNOOC did not promptly reply to emails requesting comments regarding their allocation for May. The other companies could not be contacted right away for their remarks. The heightened production aligns with market forecasts due to decreased prices and an intended output increase by OPEC+, which produces over 40 per cent of the global oil supply. On Sunday, Aramco reduced the May official selling price (OSP) for its main Arab Light crude to $1.20 a barrel above the average Oman and Dubai prices, a decrease of $2.30 from the April OSP. That marks a four-month low for the premium above Oman and Dubai prices and is nearly at the lowest point in four years. The decline in premiums comes after an unexpected choice by OPEC+ to raise production by 411,000 barrels daily in May, three times the anticipated rise.

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The rise in supply and worries regarding future demand, prompted by a worsening trade conflict between the U.S. and China, have pushed oil prices to a four-year low this week. "The pairing of decreased benchmark prices and significant reductions in OSPs offers term lifters some comfort by lowering feedstock expenses," stated LSEG senior analyst Anh Pham. "Additionally, ample oil resources may aid in stabilising prices, especially if sanctions continue to limit supplies from Venezuela or Iran," he noted.  Saudi Arabia is the second biggest crude oil provider to China, following Russia. According to Chinese customs data, China brought in 84.3 million barrels of crude oil from Saudi Arabia in the first two months of this year, a 13 per cent decrease compared to the 96.6 million barrels imported during the same timeframe last year.