Oil & Gas

Saudi Arabia’s crude oil exports to China are poised to dip next month after state oil giant Aramco raised its prices for February deliveries—the first hike in three months. According to a Reuters report citing trade sources, Saudi shipments to China are expected to fall from 46 million barrels in January to 43.5 million barrels in February. Aramco will reportedly reduce deliveries to Chinese oil majors CNOOC and PetroChina while increasing supplies to Sinopec and Sinochem.

The price hike, announced earlier this week, saw Aramco raising the premium for its flagship Arab Light crude by $0.60 per barrel. This brings the price to $1.50 per barrel over the Oman/Dubai average, the regional benchmark for Middle Eastern crude exports to Asia. Bloomberg revealed this price adjustment, which is seen as a stronger-than-expected move, especially as a Bloomberg poll of traders and refiners had forecast a modest $0.10-per-barrel increase.

Saudi Arabia’s pricing decisions, traditionally unveiled around the fifth of each month, often set the trend for other Middle Eastern oil producers targeting Asian markets. The February price increase reflects tightening global oil supplies, as OPEC+ producers continue to curb output and Western sanctions on Iranian and Russian oil weigh on supply availability. The Middle East's benchmark prices have also been on the rise, further supporting the price hike.

Adding to the upward pressure on prices, OPEC's combined output reportedly fell in December, with a 50,000-barrel-per-day decline bringing total production to 26.46 million barrels per day. The drop was driven by reduced output in the UAE due to field maintenance and a production dip in Iran. This decrease, alongside ongoing supply cuts and geopolitical factors, underscores the challenges in balancing supply and demand in the global oil market.