China’s top oil supplier and the world’s largest oil exporter, Saudi Arabia, will be cutting its crude exports to the world’s top oil importer by at least 500,000 bpd in March.
According to Reuters, Saudi Arabia, has decided to cut down supply because of a slump in refinery demand amid the coronavirus outbreak.
China’s typical intake of Saudi crude oil is between 1.8 million bpd and 2 million bpd, according to Reuters’ sources.
Last year, Saudi Arabia significantly raised its crude sales to the China, boosting its exports by 47 percent and beating Russia for the top Chinese supplier spot for the first time in four years.
However, the coronavirus outbreak has significantly slowed fuel demand in China as the authorities imposed travel restrictions in an effort to quickly contain the outbreak.
City lockdowns, domestic travel restrictions, and thousands of canceled flights to and from China have weighed on Chinese gasoline, diesel, and jet fuel demand over the past month.
Due to weak fuel demand and depressed industrial activity, Chinese refiners—from the biggest refiner in Asia, Sinopec, to the independent refiners in Shandong—have cut refinery runs, while commodity trading houses and oil majors have scrambled to find spot buyers for crude oil outside China.
Chinese oil refiners have cut their daily run rates further, to around 10 million bpd last week—the lowest level since 2014, according to industry insiders who spoke to Bloomberg.
While refiners have cut run rates, China’s fuel exports are booming amid battered domestic demand, analysts and trade sources tell Reuters as higher Chinese exports flood the Asian market, which sees depressed demand from the outbreak itself.
The slowdown in China’s industrial activity is causing the worst shock to oil demand in over a decade, Jeff Currie, global head of commodities research at Goldman Sachs, said in an interview on Bloomberg earlier this month.