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Saudi oil sale signals more Hormuz exits
Aramco sells heavy crude from Gulf of Oman
Oil tankers and cargo ships in the Gulf of Oman. (Elke Scholiers/Getty Images)
Key Takeaways:
- Saudi Aramco sold about 4 million barrels of Arab Medium and Heavy crude to PetroChina for September loading outside the Strait of Hormuz.
- The sale signals continued crude movements near Hormuz as Chinese refiners buy Middle Eastern barrels transferred outside higher-risk areas amid supply concerns.
- Chinese buyers have also purchased Iraqi, Qatari and Abu Dhabi crude offered outside Hormuz, though analysts expect imports to remain below pre-war levels.
Saudi Arabia has sold its heavier crude grades to Chinese refiners for a second time this month, a sign that flows through the Strait of Hormuz are likely to remain elevated.
State-owned Saudi Aramco recently sold around 4 million barrels of Arab Medium and Heavy crudes to PetroChina Co. for loading in September at locations just outside Hormuz, said traders familiar with the matter, who asked not to be named as they can’t speak to the media. That followed a a recent sale for sulfur-rich grades that can load off the Omani coast as soon as this month, which also went to China, they said.
READ MORE: Hormuz oil flows rising as Middle East producers ramp up
Aramco has managed to ship large volumes of its crude out from the Red Sea port of Yanbu after Hormuz’s effective closure, but the east-west pipeline connecting the port has only carried the nation’s lighter grades. The company is now selling its heavier grades by moving them through Hormuz.
“Chinese refiners are becoming more willing to accept Middle Eastern barrels when they can be transferred outside the highest-risk zones,” Emma Li, lead China market analyst at analytics firm Vortexa, said in a note. If sustained, “this could reopen the traditional Middle East-to-China trade without requiring Chinese vessels to transit” dangerous waterways like the Hormuz, she said.
The spot buying comes after Saudi Arabia long-term contract sales to China plunged due to disruptions in Hormuz.
Like Saudi Arabia, other Persian Gulf nations including Iraq and Qatar have also increased crude exports, with some of the additional supplies being snapped up by Chinese refiners.
Processors like PetroChina took at least 2 million barrels of Qatari Al-Shaheen and Marine oil after it was offered at locations outside the Hormuz. China had also recently bought millions of Iraqi Basrah crude barrels as well as oil from Abu Dhabi National Oil Co.’s most recent tender.
A spokesperson for Aramco declined to comment. Representatives for PetroChina didn’t immediately respond to an email seeking comment.
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“Expectations of prolonged supply tightness are encouraging more active buying rather than excessive reliance on stock drawdowns” on the part of Chinese refiners, said Muyu Xu, a senior crude analyst at Kpler.
While China has been an active participant in the recent spate of spot tenders for Middle Eastern fuel, it’s unlikely that overall crude flows to the country will bounce back to pre-war levels.
Analysts at Rystad Energy, Energy Aspects and FGE NexantECA expect purchases to rise to as much as 1.2 million barrels a day to under 10 million barrels a day in the year’s final quarter. China imported 12 million to 13 million barrels a day last year.
