August 11, 2023 (MLN): China is poised to take about 40% more crude from Saudi Arabia via term contracts next month as a mega-refiner starts taking more oil under a new deal, Bloomberg reported.
Refiners are expected to receive about 52 million barrels in oil cargoes in September, up from around 37 million barrels this month, according to traders who participate in the market.
Companies are allocated barrels after making supply nominations to Saudi Aramco following monthly pricing for its crude.
The increase coincides with the start of a new supply contract for Rongsheng Petrochemical Co., which entered into a 24.6 billion yuan ($3.4bn) deal earlier this year with Aramco that included a stake and an agreement to sell crude to the Chinese refiner.
Saudi Arabia has so far committed in giving full contractual cargoes to its Asian buyers, even after pledging prolonged supply cuts globally.
State-owned Saudi Aramco raised its price for Arab Light crude for September sales to Asia by 30 cents to $3.50 a barrel above the benchmark, but the hike was lower than what the market was expecting.
Compared with August, more Chinese refiners nominated term cargoes this month.
China’s state-owned refiners plan to increase processing rates to a record this month, according to industry consultant OilChem.
That boost to operations also contributed to the higher nominations, traders said.
Outside of China, Aramco gave full contractual volumes to other refiners in South Korea, Taiwan, and Thailand for September.
Robust flows to the region signal Aramco’s pledged cuts could impact buyers more significantly elsewhere.
