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Saudi Aramco’s China Deals Point to Future of Oil Demand – Bloomberg

The pivot to Asia comes as the kingdom’s crude shipments to the US and Europe fall to historic lows. China’s importance to Saudi Aramco is growing. (Fayez Nureldine/AFP)
The pivot to Asia comes as the kingdom’s crude shipments to the US and Europe fall to historic lows. China’s importance to Saudi Aramco is growing. (Fayez Nureldine/AFP)

Alex Longley, Bloomberg

LONDON
EnergiesNet.com 10 23 2023

If you want to know where the long-term future of oil demand lies, take a look at what Saudi Aramco has been doing lately.

Earlier this year, the world’s biggest oil company bought a stake in independent Chinese refiner Rongsheng Petrochemical Co. in exchange for supplying it with 480,000 barrels a day of crude for 20 years.

In recent weeks, it also signed agreements with a pair of smaller processors to embark on similar deals, each time exploring a 10% equity stake and an agreement to provide crude for the plants to process.

Those are long-term shows of faith in Chinese oil consumption, though they also come as the kingdom’s customers in Europe and the US balk at higher prices.

Two weeks ago, Saudi Arabia sent just 67,000 barrels a day of crude to America, the second-lowest volume on record in data going back to 2010. The lowest was this past June. Meanwhile, record prices have some European refiners asking for less crude than usual in their long-term contracts.

Source: Kpler
Figures are a percentage of total monthly exports

BP Plc’s annual energy outlook sees China’s consumption at about 16 million barrels a day in 2025 and 2030, and then dropping to 14 million barrels by 2040. Still, that’s more than any country consumes today except China itself and the US.

Of course, there are caveats to Saudi Aramco’s agreements. Two of the three deals haven’t been completed yet, and one of those is for a refinery that’s in the process of being built.

It’s also possible the pair aren’t finalized or that they’re memorandums of understanding designed to woo other counterparties interested in locking up Saudi supplies.

But the direction of travel is clear: Saudi Arabia is sending more of its oil to China and less to the US and Europe. These deals will lock in that trend for longer.

Source: “The momentum of the solar energy transition” in Nature Communications
Source: “The momentum of the solar energy transition” in Nature Communications

bloomberg.com 10 20 2023

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