Russia Beats Saudis to Grab China Oil Market

Russia Beats Saudis to Grab China Oil Market
Russia Beats Saudis to Grab China Oil Market

Russia surpassed Saudi Arabia to become China’s top crude supplier as the fight for market share in the world’s second-largest oil consumer intensifies.

China imported a record 3.92 million metric tons from its northern neighbor in May, according to data emailed by the Beijing-based General Administration of Customs on Tuesday.

That’s equivalent to 927,000 barrels a day, a 20% increase from the previous month. Saudi sales slumped 42% from April to 3.05 million tons, Bloomberg reported.

China is becoming a key market for global oil exporters as surging output from shale fields from Texas to North Dakota allows the US, the biggest crude consumer, to rely less on overseas supplies. The Asian nation will account for more than 11% of world demand this year, the Paris-based International Energy Agency predicted this month.

“This is a clear sign of how spoilt Asia is for choice these days, with Middle Eastern crude now having to compete with oil from other regions,” Amrita Sen, the chief oil-market analyst at Energy Aspects Ltd., a London-based consultant, said, adding: “Russia is increasingly looking east and the various deals made between Rosneft and China are likely to see more Russian crude head to China permanently.”

Russia is China’s top crude supplier for the first time since October 2005 as it seeks new markets for its crude amid western sanctions over its dispute with Ukraine.

OAO Rosneft in 2013 agreed to supply 365 million tons over 25 years to China National Petroleum Corp. under a $270 billion deal. The same year, the company agreed an $85 billion, 10-year deal with China Petrochemical Corp.

  Angola Shipments

Russia is not the only crude shipper to overtake Saudi Arabia last month. Angola sold 3.26 million tons to China, 14% more from April, rising two places to take second spot. The Middle East country lost its top rank for the first time in 13 months.

“Following Russia’s recent acceptance of the renminbi as payments for oil, we expect more record high oil imports ahead to China,” Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., said, referring to the Chinese currency. “If Saudi Arabia wants to recapture its number one ranking, it needs to accept the renminbi for oil payments instead of just the dollar.”

Iran exported 2.2 million tons to China, the customs data showed. The Persian Gulf nation has estimated it could double its global crude sales within six months of international sanctions being lifted as a June 30 deadline for a nuclear deal with world powers approaches.

  Price Increase

In April, Saudi Arabia had expanded its share of China’s oil market as it shipped 5.26 million tons of crude to the Asian nation, the highest level since July 2013.

The Middle East producer raised official prices for its main crude grades sold to Asia the past four months, after record discounts for March cargoes.

Arab Light and Arab Medium were set at 10-month highs for July, according to a statement from state-run Saudi Arabian Oil Co.

“Russia is using its good relationship with China to increase supplies and has now taken the top spot,” Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, said by phone. “Meanwhile, Saudi Arabia is losing its crown as its selling prices in Asia haven’t been attractive enough.”