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Home / Business / Saudi Arabia dramatically changed oil exports to China and the United States

Saudi Arabia dramatically changed oil exports to China and the United States



A worker is standing by a pipeline looking at a torch pile at the oilfield complexes of Saudi Aramco in Shaybah, Saudi Arabia.

Reza / Getty Images

Saudi Arabia has seriously ramped up its oil exports to China in recent months.

How dramatic is the change? Take a look at this graph, which uses data from the oil ship tracking company TankerTrackers.

The Saudi Kingdom's crude shipments to China have doubled in a year. During the same period, oil exports to the United States fell by almost two-thirds.

According to TankerTrackers, which tracks oil tankers and shipments based on satellite imagery and the ships' automatic identification systems, Saudi Arabia exported a total of 1

,802,778 barrels per day (bpd) to China in July, compared with 921,811 bd as of August 2018. By contrast, exports to the United States in July 262,053 bd, almost 62% down from 687,946 bd as of August last year.

US sanctions against Iranian oil have helped shift. Major Asian energy importers such as China have been forced to move away from the Islamic Republic – OPEC's third-largest producer – and start buying more Saudi barrels to make up for that shortfall.

The United States is now more self-reliant than ever thanks to its own shale oil revolution, which helped it become the world's largest oil producer by the end of last year.

But the numbers also signal a mix of short-term tactics and long-term strategy for the Saudis, industry experts told CNBC.

Saudis & # 39; bang on the brakes & # 39; to the United States

"Saudi Arabia learned from the last OPEC cut in 2017 that they got the biggest bang for their buck by cutting flows into the largest, most transparent and timely market – the United States," said Matt Smith, director of commodity research at commodity analysis firm ClipperData, referring to the coordinated production cut that OPEC and its allies orchestrated to lay a floor below falling oil prices.

"Choking back the flow to the United States was the best way to take stock and turn on bearish sentiment, and they use the same tactics again."

ClipperData's figures, which differ from TankerTrackers due to different tracking methods, still show US crude oil imports in July down over 60% from last October.

Meanwhile, Smith said, while Saudi Arabia "applies the brakes to the most transparent market, sending more crude to the most opaque, China."

That's where some industry analysts say Riyadh uses short-term tactics: "Affecting what's still the most visible and closely monitored market indicator, US crude, "Antoine Halff, co-founder of energy market analytics firm Kayrros, told CNBC.

The market has largely relied on weekly US figures, which until the emergence of satellite imagery to provide greater openness about global equities – provided the best available picture of market conditions Despite the greater availability of world market inventory thanks to satellite data, it seems "The goal of influencing the US stock measurement to be very real for OPEC in general and for the Kingdom in particular," Halff said. "Right or wrong, this is the point of reference that everyone is looking at."

China, on the other hand, is not as future as the OECD countries about its shares, and the data is not as visible to the market. Halff notes that there are no established benchmark indices for Chinese equities as for the United States

"Manufacturers are far less concerned with building Chinese equities than they are about building US or OECD equities for what it can signal to the market, " he said.

China, the "savvy buyer"

While TankerTrackers co-founder Samir Madani has described China as a kind of "black hole" for world oil exports, other oil analysts see a clear strategy from Beijing.

"The Chinese are very knowledgeable and sharp buyers, exporters who supply them have very good reasons for that," Halff said. In the current low oil price climate, the world's largest oil importer is pleased to increase its Saudi crude purchases as its appetite increases, especially given the launch of two new refineries that will increase its refining capacity by 800,000 bpd.

Employees close a valve of a pipe at a PetroChina refinery in Lanzhou, Gansu Province.

Stringer | Reuters

In the months following President Donald Trump's imposition of unilateral sanctions on Iran after withdrawing from Iran's nuclear deal in 2015, data show a dramatic surge in Chinese crude imports and crude oil. This is "partly, once again, thanks to the availability of Saudi barrels," Halff added, "either for precautionary reasons, for price opportunism, or in preparation for new refining capacity coming online – or all of that." 19659010] Saudi Arabia's Long Games in Asia

Unlocking the Asian market share is also a key long-term goal for Riyadh, as it is for other regional producers competing to capture downstream capacity across the continent. Saudi Aramco's plan to acquire a 20% stake in Indian refining and petrochemical giant Reliance is the latest example of this.

Nor is there a risk for the Saudis to lose the US as a customer thanks to its giant Aramco-owned Motiva refinery in Texas. Therefore, "Aramco is willing to increase or decrease to the United States based on its own needs," says Ellen Wald, president of Transversal Consulting and author of the book "Saudi, Inc." She is being asked because she wants to maintain that relationship, she told CNBC in an email. "In short," she said, "Aramco is good at increasing or decreasing its exports to the United States based on its own needs, but in China it wants to meet demand based on customer requests."


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