By China is set to import less crude oil from Saudi Arabia on a month-on-month basis in February after the Kingdom hikes prices for exports to Asia, according to a Reuters report.
Saudi Arabia, and the Organization of the Petroleum Exporting Countries and allies had extended their voluntary production cuts of 2.2 million barrels per day till the end of March.
State-owned Saudi Aramco is likely to ship about 43.5 million barrels of crude oil to China next month, Reuters reported, quoting allocations from Chinese refiners.
In January, the allocations stood at 46 million barrels, which is a three-month high, according to the report.
China is the world’s largest importer of crude oil.
According to the report, China’s state oil companies such as CNOOC and PetroChina, and private refiner Hengli Petrochemical will be importing less crude oil in February.
Saudi Aramco will increase its exports to Sinopec and Sinochem, instead.
Steep production cuts by OPEC+
Several members of the OPEC+ alliance, including Saudi Arabia and Russia agreed to delay a planned increase in oil output from January.
The cartel and its allies extended the steep voluntary production cuts till the end of March to support oil prices amid weak demand from China last year.
The voluntary production cuts were extended multiple times last year as demand was subdued and oil prices failed to sustain above $80 per barrel.
Other than the 2.2 million barrels per day of voluntary cuts, OPEC+ has been adhering to 3.65 million barrels a day of output cuts.
These cuts were extended till the end of 2026 in order to balance the oil market.
However, the International Energy Agency expects crude oil supply from the likes of the US, Guyana, Argentina, Brazil, and Canada to outstrip demand growth this year.
It will be a tricky decision for OPEC as the cartel plans to increase output from April.
Oil prices to go up
As supplies from OPEC remained tight, Saudi Aramco raised its official selling price (OSP) for crude exports to Asia for February loadings.
This is the first time in three months that the prices have been increased.
The state-owned company in Saudi Arabia raised OSP for flagship Arab Light crude by 60 cents to $1.50 per barrel above the Oman/Dubai benchmark average.
Experts see more demand for Middle Eastern crude grades in the coming months from Asian refiners in India and China.
The rise in demand is amid wider sanctions from the West targeting tankers carrying Russian and Iranian crude.
Saudi Arabia is the second largest crude oil supplier to China after Russia.
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