Saudi Arabia may overtake Russia as China's top crude supplier

At a time when there is noise about OPEC+ potentially resuming their production increases from April, experts see Saudi Arabia replacing Russia as China’s main crude supplier in the coming months. 

It appears that the eight OPEC+ nations currently limiting their oil production voluntarily are considering raising their output, potentially starting in April.

Under the Organisation of the Petroleum Exporting Countries and allies’ agreement, these countries increased their production targets by slightly less than 3 million barrels per day over the course of last year.

Due to seasonally weaker demand, a temporary halt in operations was agreed upon for the first quarter of 2026.

“With demand picking up again in the second quarter, there would thus be some leeway for an expansion of production, especially as the oil market is likely to be less oversupplied than expected due to unplanned and sanction-related supply disruptions,” Carsten Fritsch, commodity analyst at Commerzbank AG, said. 

The argument for resuming production expansion is supported by the fact that oil prices remain approximately 10% higher than they were at the start of the year.

The decision on this will be made at the meeting of the eight countries on March 1.

Saudi Arabia poised to unseat Russia in Asia market

Following a price cut to its flagship crude grade—which is now at its lowest level for Asian buyers in over five years—indications are growing that Saudi Arabia will increase its oil exports to China.

Saudi Aramco is projected to increase its crude oil shipments next month to 56–57 million barrels, marking a rise from the previous 48 million barrels, according to Warren Patterson, head of commodities strategy at ING Group.

“Elsewhere in Asia, India could receive at least 1m bbl above its usual March volumes under long‑term contracts, while refiners in South Korea and Japan are also set to lift higher-than-normal flows,” Patterson added. 

According to data from Vortexa and Kpler, as reported by Reuters, Russian oil shipments to China have increased this month, exceeding 2 million barrels per day.

This marks a rise from the January figure, which was just over 1.7 million barrels per day.

The significant price cuts on Russian oil appear to have successfully stimulated extra demand.

It is uncertain, however, if this trend will persist into March, said Fritsch.

Trade sources suggest that Saudi Arabia is expected to increase its crude oil supply to China next month. 

Lower selling prices to compensate for higher volumes

Reports vary on the precise volume, with Reuters citing at least 58 million tons, while Bloomberg estimates the supply to be between 56 and 57 million tons.

For customers in Asia, Saudi Arabia reduced its official selling prices for March to their lowest point in over five years.

“Apparently, it intends to compensate for this with higher delivery volumes,” Fritsch said. 

Higher delivery volumes than contractually agreed are also anticipated for India, South Korea, and Japan, according to traders.

“This is likely to make it more difficult for Russia to find sufficient buyers for its oil,” Fritsch noted. 

India is projected to import 1.16 million barrels of Russian oil per day in February, based on Kpler data.

However, these import volumes are expected to see a significant drop in the months following.

Geopolitical tensions and oil prices

Meanwhile, oil prices dipped on Tuesday after spending most of the day in a stable range. 

The second round of indirect talks between the US and Iran is currently underway in Geneva.

Pressure is mounting on both parties to secure an agreement to prevent a military escalation.

On Monday, Iran began military exercises in the Strait of Hormuz, which led to a rise in oil prices.

US President Donald Trump has repeatedly threatened military intervention if the talks fail.

Ahead of scheduled talks with the US later today, Iranian forces were reportedly active in the Strait of Hormuz region.

“That said, thin liquidity due to Lunar New Year holidays has limited broader price moves, while markets also await Russia-Ukraine discussions beginning today,” ING’s Patterson said. 

Consequently, market participants in the oil sector will be closely monitoring the Geneva talks today.

The price of West Texas Intermediate crude oil was last at $62.01 per barrel, down 1.2%, while Brent was 2.3% lower at $67.05 a barrel.