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Saudi Arabia is expected to increase its crude oil supply to China in October after the world’s top crude exporter cut the prices of the oil it sells in Asia, trade sources told Reuters on Thursday.
The Kingdom is set to ship a total of 46 million barrels of its crude to China next month, up from an estimated 43 million Saudi barrels expected to land in the world’s largest crude importer in September.
China’s biggest state refiners Sinopec and PetroChina have asked for more supply from Saudi Arabia loading for October, Reuters’ trade sources said.
The Kingdom slashed its official selling prices (OSPs) for next month to Asia, amid worsening refining margins in China and the wider Asian region and weaker Dubai benchmark prices.
The price of Saudi Arabia’s flagship grade, Arab Light, to Asia for October was cut by $0.70 per barrel compared to the September pricing. As a result, demand from the largest refiners in China has increased, while nominations from major private refiners with allocated import quotas have held stable for next month, according to Reuters’s sources.
Refiners in Asia expected lower Saudi crude prices for October compared to September prices, partly due to weak refining margins across the world’s top importing region.
The latest Saudi cut to its oil prices could spur more buying in China, which tends to import higher volumes contracted at lower prices.
China imported in August the highest monthly volume of crude oil for a year as purchases increased with the fall in international oil prices when cargoes were contracted.
China’s propensity to stock up on commodities at lower prices could explain why most commodity imports have seen higher volumes despite the Chinese economic growth faltering below expectations.
With China’s apparent oil demand weaker than expected, the lower international prices may have played a bigger role in Chinese purchases for August.
