Copyright BusinessAMBE
Oil group
In the news:
- Just last Monday, the Saudi oil group announced that it had reached an agreement with
Rongsheng Petrochemical to buy 10 percent of its shares for$3.6 billion . The . The deal comes with oil deliveries: 480,000 barrels per day delivered directly toChina's largest refinery.- That has a production capacity of 800,000 barrels a day. It also produces more than 4 million tons of ethylene a year.
-
The day before, also reached an agreement with two other Chinese companies. With them, the oil group would establish a joint venture and together build a refinery with a production capacity of 300,000 barrels per day to be completed by 2026. The Saudis will supply 210,000 barrels per day.
Saudi Aramco will own 30 percent of that refinery. Majority shareholder with 51 percent of the shares will be Chinese arms giantChina North Industries Group . Something that is unlikely to pleasethe United States . The third player is the investment companyPanjing Xincheng Industrial Group with 19 percent of the shares.
The numbers: These indicate a sharp increase in deliveries.
- According to these two deals,
China will have to import 690,000 barrels a day fromSaudi Arabia . -
Knowing that
China was already importing 1.75 million barrels per day in 2022. This would be a 40 percent increase.
Shoulder to shoulder with
The challenge: Staying No. 1 in
- By 2022,
Saudi Arabia wasChina's largest supplier, the world's largest oil importer.Russia landed in second place, with 1.72 million barrels per day (up 8 percent from 2022). -
However, that situation has already changed since
New Year's Day .Russia is lowering prices to sell its barrels. Mainly because of the European embargo on Russian crude oil that took effect in December. The country has too much oil and wants to get rid of it.
Riyadh is now striking back with a huge, long-term deal.Amin Nasser , CEO ofSaudi Aramco , said recently that they are "the key to maintaining market share inChina without having to lower crude prices."
The bottom line: Is this new contract a blow to
- The reverse calculation exercise is also possible. If oil supplies from
Saudi Arabia increase, those fromRussia may come under pressure.- For example, there is the effect of the post-covid stimulus (this remains an unknown factor in the markets), with
China importing more oil in January and February than in 2022.
- The 40 percent increase from
Saudi Arabia could certainly put pressure on Russian imports. These might not increase if Chinese needs are already guaranteed by long-term contracts withSaudi Arabia .
- For example, there is the effect of the post-covid stimulus (this remains an unknown factor in the markets), with
-
That increase also proves that
Russia is having more trouble getting rid of its oil than is commonly thought. The idea thatAsia will pick up oil anyway thatRussia no longer sells inEurope is undermined asChina diversifies its oil suppliers.
(dv/fjc)
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