December 02, 2024 [Reuters]- Saudi Arabia clawed back market share of Asia’s crude oil imports in November, while Russia surrendered some of its barrels in what may be an early sign of a shift in market dynamics.
Asia’s imports from Saudi Arabia, the world’s biggest crude exporter, rose to 5.83 million barrels per day (bpd) in November, up from 5.28 million bpd in October, according to data compiled by LSEG Oil Research.
Meanwhile Russia’s supplies to Asia, the top-importing region, dropped to 3.51 million bpd in November, down from October’s 3.96 million and the lowest since January, according to LSEG.
The data show that Asia’s imports from Saudi Arabia went up by 550,000 bpd in November, while Russia’s dropped by 450,000 bpd.
The swing to Saudi Arabian barrels from Russia came even as the kingdom’s state-controlled oil producer, Saudi Aramco, increased the official selling prices for its crude to Asian customers for November-loading cargoes.
Aramco’s benchmark Arab Light grade was increased by 90 cents a barrel to a premium of $2.20 over the regional benchmark Oman/Dubai average for November.
The increase did come after the premium had dropped to the lowest in nearly three years in October, and was seen at the time of the increase as a reflection that Asia refining margins were recovering.
The profit from refining a barrel of Dubai crude at a typical Singapore refinery rose to $6.62 on Nov. 29, and has risen 240% since hitting $1.95 on Oct. 10, when the current uptrend started.
Notwithstanding the increase in Aramco’s November OSPs, Saudi crude has become more price competitive in Asia relative to other grades, including Russia’s Urals, which is the main crude exported from its western ports.
Cash Dubai crude ended at $71.83 a barrel on Nov. 29, a premium of $4.36 over Russia’s Urals, which closed at 67.47.
This premium is lower than it was for much of the recent months, when it has traded above $5 a barrel.
Russian crude also faces higher transport costs, given the longer sea voyage from Russia’s ports in the Baltic to destinations in Asia.
These costs are also likely to increase as more sanctions on Russia’s so-called “shadow fleet” of tankers are adopted, with Britain imposing new measures against 30 vessels last week, taking the total to 73.
CHINA, INDIA
Russian crude has largely been limited to just two major buyers in Asia, China and India, since sanctions were imposed after Moscow’s 2022 invasion of Ukraine.
China’s imports of Russian oil dropped to 2.04 million bpd in November from 2.19 million in October, while India’s slipped to 1.47 million bpd from 1.75 million.
At the same time China lifted its imports of Saudi crude to 1.68 million bpd in November from 1.62 million in October, while India saw arrivals of 770,000 bpd from the kingdom, up from 610,000.
Other Middle Eastern suppliers also saw rises in November imports, which probably reflects the competitiveness of their crudes against grades priced against global benchmark Brent, such as those from West Africa.
China’s imports of Iraqi oil rose to 1.53 million bpd in November from 1.21 million in October, while those from Oman lifted to 770,000 bpd from 680,000 bpd.
India’s arrivals of crude from the United Arab Emirates increased to 510,000 bpd in November, up from 360,000 bpd in October, LSEG data shows.
The premium of Brent crude over Dubai reached an 11-month high of $2.98 a barrel on Aug. 30, around the time that many of the November-arriving cargoes would have been arranged.
The premium has since trended lower, ending at $1.42 a barrel on Nov. 29, and this narrowing may help exporters such as Angola and Nigeria regain market share in Asia for cargoes arriving early next year.
The challenge for Middle East exporters is to keep their crudes competitive enough against other producers so as to maintain, or regain, market share.
This is especially key for them given Asia’s overall appetite for crude is likely to drop in 2024 from the previous year, with imports for the first 11 months coming in at 26.52 million bpd, down 370,000 bpd from the same period in 2023.
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