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Saudi Arabia regains top oil exporter status to China

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March 7
12:41 AM 2016

The Kingdom of Saudi Arabia (KSA) has again emerged as the top oil exporter to China. The latest data on January oil exports has revealed that Saudi Arabia has surpassed Russia which was China's top oil exporter for December 2015. Oil exporters are vying for major share in China market. Saudi's market share rose to 15.9 percent highest since June 2015.

Saudi Arabia has regained its top oil exporter status to China, after losing to Russia in December 2015,, according to a research report carried out by Barclays. China imported 6.3million barrels of crude oil per day in January. However, Chinese oil imports showed drop during January.

Recording fall in oil imports for the first time since May 2015, China oil imports eased by 305,000 barrels a day in January. Russia has overtaken Saudi Arabia in oil exports to China until December 2015. It exported 796,000 barrels of crude oil per day to China in January 2016 and this is 341,000 barrels less than the exports in December, as reported by Yahoo Finance

Saudi Arabia's oil exports to China during January almost remained at previous level - one million barrels per day in January from 1.1 million barrels per day in December. Russia's oil exports to China on the other hand, fell during January by 341,000 barrels per to 796,000 barrels a day giving leeway to Saudi Arabia to become the top oil exporter to the world's second largest economy.

Saudi Arabia and Russia are major competitors in oil exports to China. Saudi Arabia lost its top oil exporter status to Russia for six times during the past five years, according to RBC Capital Markets. Russia has accepted Chinese Yuan as denominated currency for oil exports which is another major reason for surge in exports to China. Exports from Saudi Arabia to China were up 120,000 barrels a day in five years. Countries such as South Sudan and Colombia have surpassed this growth rate, as reported by Business Insider.

Feifei Li, an analyst at Barclays, said "This slowdown could have to do with China's teapot refineries, which are small, private oil refineries in China that have been buying up crude oil with the intention of exporting the final product." After Russia suffering from drop in oil exports to China, Saudi's market share rose to 15.9 percent highest since June 2015.

Indicating highest growth rate in three years, Saudi's oil exports to China grew 36 percent in February 2016, according to ClipperData, a global tracker of crude shipments. Matthew Smith, Director (commodity research) at ClipperData, sees the surge in Saudi's oil exports as a political shot across the bow of Iran. With Iran joining the oil exports battle after the lifting of Western sanction, Saudi Arabia has turned keen on sustaining market share. Saudi Arabia's state-owned oil company Aramco has made it clear that there wouldn't be production cuts just to make space for others, according to World Tribune.

Russia ESPO blend oil is mostly consumed by Chinese teapot refineries which have been given quotas on oil imports in 2015. But, owing to credit constraints, these teapot refineries were unable to import oil. Recently, two ESPO cargos were defaulted by Chinese teapot refineries owing lack of credit support. 

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