Russia overtakes Saudi Arabia for second time in China crude supply

Russia supplied a record amount of crude oil to China in September, surpassing Saudi Arabia for the second time as the top seller to the Asian giant, customs data showed, boosted by demand from independent refiners.

In an unprecedented reform to its previously state-dominated oil market, China has since July allowed in half a dozen new crude oil buyers, mostly independents.

Russian supplies, especially the ESPO blend, have been popular with these users, which are looking to test their refineries with a fuel that is relatively easy to process and from a supplier located nearby, traders have said.

Chinese buyers have scooped up Russian crude cargoes in September and October loadings, also attracted by spot premiums at multi-year lows.

The Chinese customs data showed the country bought 4.042 million tonnes of crude oil from Russia last month, or about 983,590 barrels per day, up 42 per cent from a year earlier.

Imports from Saudi Arabia were down 16.5 per cent on year at about 961,710 bpd. Traders attributed the fall to a hike in the Saudi official selling prices and as several large Chinese refineries were shut for planned overhauls.

Though this is the second month Russia has surpassed Saudi shipments, analysts said the Middle Eastern nation would retain its top spot in annual totals. Russian volumes last beat Saudi Arabia in May.

“These monthly variations happen because of factors such as arbitrage and which refineries are under maintenance,” said Tushar Bansal, head of research for ‘East of Suez’ with consultancy FGE.

“The target (for China) is for any single country to be below 20 per cent in terms of market share. The Middle East, including Saudi Arabia, will continue to be the biggest supplier to China,” said Bansal.

For the first nine months of 2015, China’s Russian oil imports grew 30 per cent on year to about 810,000 bpd, which compared to Saudi supplies at an average of 1.03 million bpd, the data showed.

IRAN SALES EDGE DOWN

China’s September crude oil imports from Iran fell 17 per cent from a year earlier to 416,450 bpd. Supplies for the first three quarters dropped nearly 2 per cent to about 559,020 bpd, the data showed.

That is below an annual contractual amount of roughly 600,000 bpd as one regular buyer, an independent petrochemical plant, Dragon Aromatics, remained shut after a fire in April.

Sources told Reuters this week that Sinopec, the world’s largest Iranian oil processor by company, is in advanced discussions to take control of the private firm.

Iran’s nuclear negotiator Abbas Araqchi on Monday said he expected a deal with six world powers on shrinking Tehran’s atomic programme in exchange for sanctions relief to be implemented by year-end.

Iran, formerly OPEC’s No.2 producer, will raise production by 500,000 barrels per day in the first week after sanctions are lifted, a senior Iranian oil official was quoted as saying this week by oil ministry news agency Shaha.