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A new Saudi marketing technique

Aramco dips into the wild world of the spot market

SAUDI Arabia has been ripping up its own rulebook. In April, the kingdom sold a cargo on the Asian spot market to one of China’s independent refineries – the “teapots”. Throughout Ali al-Naimi’s tenure, the kingdom only sold to blue-chip buyers, and rarely on the spot market.

The 0.73m-barrel cargo will be lifted from an Aramco facility in Japan’s Okinawa prefecture and shipped to Shandong, according to reports. It was sold to Shandong Chambroad Petrochemicals at a differential to the Oman/Dubai benchmark crude, though the exact price is unknown.

It signals that the kingdom is expanding beyond its state-owned customers, catering for new buyers who want more flexibility. It’s also a recognition that there are “new buyers in town”, says Michal Meidan of Energy Aspects. “A lot of them don’t have the financial ability to hedge.” So Saudi Arabia has adapted.

Having tested the waters, Aramco will probably sell more in the spot market to new buyers. Some see the latest deal as part of a trend that began last year, when Aramco sold spot crude into Europe. The aim, many said, was to squeeze Russia.

China’s teapots began buying Russian, West African and Middle Eastern crudes last year after winning quotas to import feedstock directly, instead of buying from state-owned companies.

Despite end-user demand growth slowing, crude imports continue to rise as China fills its Strategic Petroleum Reserve. In April, net crude oil imports were 7.9m b/d, up 335,000 b/d from March and 0.6m b/d higher than a year earlier, according to Barclays.

April’s import tally was the second highest level on record – just behind the 8.02m b/d recorded in February – but a teapot slowdown is expected. Some may shut for maintenance and pipeline capacity has not kept up with demand.

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