Saudi oil supplies to China seen flat for 2nd year

BEIJING: Saudi Aramco is expected to keep crude oil supply to China under an annual contract largely unchanged next year, the second year of flat demand as Chinese refiners anticipate ample supplies in the spot market and lack of new refining capacity.

Contractual volumes from the world's top exporter is set at around 1.1 million barrels per day for 2015, though there maybe some variations in the actual amount of oil to Chinese refiners, traders with direct knowledge of the matter said.

"Nobody has asked for an increase as companies see a potential overhang in the spot market, so it doesn't make too much sense locking higher amount of term shipments," said one Beijing-based trade source.

China's moderating economic growth would cap real demand from the world's top oil user. The International Energy Agency last forecast China's 2015 fuel demand to maintain a tepid 2.5-percent growth, same as this year. But China's appetite for foreign crude, already making up close to 60 percent of its total requirement, is also driven by the need to build up its strategic and commercial stockpile.

Apart from Saudi Arabia, refiners are set to keep imports under similar term deals unchanged from Iraq and Iran, another two main Middle East exporters, both of which have ramped up sales to China this year.

Refiners have however locked in a combined additional supplies of about 250,000 bpd from Russia and Kuwait for next year versus 2014, trading officials have said.

Except for one revamp program at Sinopec's Jiujiang plant in the east and increases at two greenfield plants started this year (Sinochem's Quanzhou and PetroChina's Sichuan), there will be no new refinery due on line next year.

China recorded its first major fall in crude purchases from Saudi Arabia this year after a decade of steady growth, as some plants scaled back throughput amid poor refining margins and growing competing supplies from Iraq, Iran, Russia and Oman.

Saudi oil imports fell nearly 10 percent in the first 10 months of the year at 41.156 million tonnes, or just a touch below 1 million bpd, according to Chinese customs.

Under the term agreements, top refiner Sinopec Corp is expected to take more than 85 percent of the Saudi barrels, while the rest goes to PetroChina and Sinopec Corp.