Agency Report
Saudi Arabia is expected to ship in May halve the crude volumes to China it supplies in April as the Kingdom hiked its official selling prices while part of the supply is trapped in the Middle East due to the war.
Saudi Arabia, the single biggest crude oil exporter in the world, is expected to send about 20 million barrels of crude to China next month, anonymous trading sources with knowledge of the matter told Bloomberg on Monday. The volumes in May would be halved compared to the 40 million barrels Saudi state oil giant Aramco is sending to the world’s top crude oil importer in April.
Crude supply from all producers in the Middle East has collapsed in recent weeks as the near-closure of the Strait of Hormuz has forced shut-ins at upstream production and Gulf exporters are looking for alternative ways to move oil to the market.
In the case of Saudi Arabia, the Kingdom is seeking to redirect as many barrels as possible to the Yanbu port on the Red Sea.
This export route doesn’t need passage through the Strait of Hormuz, where Iran has been selectively allowing cargoes.
The U.S., however, is now moving to blockade the Strait. Tankers in the Persian Gulf have started moving away from the Strait of Hormuz in anticipation of a U.S. naval blockade announced by President Donald Trump on Sunday.
Apart from purely physical supply constraints, the Saudi crude sales to China will also suffer in May from the hike in prices the Kingdom announced last week.
Saudi Arabia hiked the price of its flagship Arab Light crude loading for Asia in May to a record-high premium over the Middle Eastern benchmarks as the de facto closure of the Strait of Hormuz upends oil flows and roils markets and prices.
Aramco has raised the price of Arab Light that would be going to Asia next month to a premium of $19.50 above the average Oman/Dubai benchmark, off which supply to Asia is typically priced