Why Saudi Arabia's oil exports to China may drop to a one-year low in April

Trade sources revealed on Thursday that Saudi Arabia, the world's largest oil exporter, is expected to see a significant decrease in its crude oil shipments to China in April, according to a Reuters report. 

The decline is attributed partly to scheduled maintenance at Chinese refineries owned by Sinopec, China's state-owned oil and gas company. 

This decrease in shipments is projected to reach their lowest point in over a year, signaling a potential shift in the oil trade dynamics between the two nations.

While the maintenance at Sinopec refineries is a primary factor behind the anticipated drop, other factors may also be at play. 

These could include fluctuations in global oil prices, changes in Chinese domestic oil demand, and potential shifts in China's sourcing strategy for crude oil.

Despite the temporary decline, Saudi Arabia is likely to remain a key supplier of crude oil to China in the long term, given the strong economic ties and energy cooperation between the two countries.

Saudi cuts oil allocations

In April, Saudi Arabia, a major OPEC oil producer, decreased its oil allocation to Chinese customers. 

Data from Reuters indicates that the allocation for April was approximately 35.5 million barrels, marking a significant reduction from the 41 million barrels allocated in the previous month, March. 

This decrease in oil allocation could have various implications for both the Chinese and Saudi Arabian economies, as well as the global oil market.

Despite the Organization of the Petroleum Exporting Countries (OPEC) and its allies, having reached a consensus to boost production in April, China's demand for Saudi Arabian oil has seen a decline. 

This development indicates a potential shift in the global oil market dynamics, with China possibly diversifying its oil import sources or adjusting its energy consumption patterns. 

OPEC’s decision

The decision by OPEC+ to increase production was aimed at stabilising oil prices and meeting the anticipated rise in global demand as economies recover from the pandemic-induced slump. 

However, the decrease in Chinese demand for Saudi oil could impact the effectiveness of this strategy and lead to a supply glut in the market, potentially driving down oil prices.

The cartel is scheduled to raise oil production by 140,000 barrels per day from April as it prepares to unwind the massive 2.2 million barrels per day of voluntary oil production cuts. 

OPEC and its allies had extended the voluntary production cuts several times last year due to poor demand and weak oil prices. 

The cuts are set to expire at the end of this month. 

Sinopec intends to close down at least 700,000 barrels per day of crude processing capacity at subsidiaries including the Yangzi, Jiujiang and Gaoqiao refineries. 

The closures will take place between mid-March and May, according to the report.

Disruptions easing

Trade disruptions caused by US sanctions on Russian and Iranian oil in late 2024 and early 2025 are easing, leading to stabilisation in Asian crude oil markets.

The trade of Russian Far East crude and Iranian oil to China is expected to increase in March as non-sanctioned tankers replace those under US embargo. 

The switch is driven by attractive profits for the non-sanctioned tankers.

India, the world's third largest oil importer, has seen a rebound in Russian oil supplies this month.