Saudi Arabia Increases March Crude Exports to China Amid Record Low Prices

RIYADH - Saudi Arabia increased its March crude oil exports to China at a steep discount that is the biggest in over five years, as the kingdom tries to protect its market share and reinforce its position in the Asian oil market through strategic energy moves.

The state-owned oil behemoth, Saudi Aramco, has reduced its official selling prices (OSPs) for Asia to their weakest point since 2019, leading some Chinese refiners to take more of the Saudi crude for March loading.

It’s the Biggest Price Cut in More than Five Years

This decision to reduce prices comes after lower global demand estimates and heightened competition from other leading suppliers such as Russia and Iran, who have also been giving massive discounts to lure buyers in Asia. The $2 per barrel decrease in the February level of Arab Light, which is Saudi Arabia’s main crude grade, has made it cheaper than the Dubai standard, something rare for the number one global oil exporter.

The bold move immediately increased demand among Chinese state-owned and private refiners, with reports indicating that China Petroleum & Chemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC) raised their March allocations by about 20%.

“Saudi Arabia is telling everyone that it will fight for every barrel of oil sold,” said a senior trader with a Singaporean energy company. “Aramco has cut prices so that Asia knows it can still rely on them for oil.”

China Strengthens Energy Bond with Saudi Arabia

Over the years, China, being the largest importer of oil globally, has enhanced its energy ties with Riyadh by securing long-term supply deals as well as engaging in joint refinery ventures. These price reductions coincide with increased output from Chinese refineries following the Lunar New Year as well as a surge in domestic consumption of petroleum products.

Many energy analysts see this price cut as a deliberate attempt to counteract the increasing competition posed by discounted Russian Urals and Iranian crudes, both of which have managed to gain some foothold in the Asian market due to sanctions imposed by Western countries.

Reaction of Global Market and Economic Consequences

The Saudi Arabian move caused a slight drop in world crude prices, with Brent futures trading at around $78 per barrel on Monday. Although there may be some short-term instability, analysts predict that this move could help maintain stable long-term supply ties between Riyadh and Beijing.

This development highlights Saudi Arabia’s continued focus on Asia when it comes to oil and strengthens ties between the two nations at a time when there are changing political powers.