Page 11 - MEOG Week 23

MEOG Performan C e MEOG

Middle East reliance on

China surges with COVID-19

mIDDLe east tHE region’s petro-states shipped about one in With the International Energy Agency predict-
every three of their crude exports last month to ing global crude demand will fall by about a
the Asian country. tenth this year, saudi Arabia and Russia corralled
Middle East oil exporters are increasing their other members of OPEC into the most drastic
reliance on China to buy its oil after the coro- output cuts in history.
navirus pandemic obliterated demand and con- Increased Chinese purchases are helping
sumption in swathes of Europe and the United push prices higher. Brent crude traded at $42
states. a barrel on Friday, double its level in late April,
China is a particularly important customer before slipping back as OPEC continued to
for Middle Eastern oil producers as they scram- deliberate over meeting dates. Oman’s main
ble to find buyers in the wake of the coronavirus. grade traded over $40 a barrel last week for the
The region’s petro-states shipped about one first time in almost three months.
in every three of their crude exports last month “The Chinese have been buying a lot of phys-
to the Asian country which is the biggest pro- ical Oman crude, due to fact that it is highly
portion in at least 2-1/2 years. Their push into blendable, and Iraq’s Basra Light,” said Ahmed
China comes with its oil demand having all-but Mehdi, a research associate at the Oxford Insti-
recovered from the pandemic. Meanwhile, con- tute for Energy studies.
sumption in swathes of Europe and the U.s. -- the saudis, Kuwait and the United Arab
normally the other key importers -- is still down Emirates all shipped more crude than ever to
sharply. China in April, when they were pumping record
China’s heightened clout was an important or near-record amounts. A month later sup-
subplot during this week’s meeting of OPEC+ plies to China were almost as large, despite the
about maintaining their output curbs. “Mid- unprecedented reductions overall.
dle Eastern producers don’t have much choice saudi Arabia’s lead over Iraq for Gulf sales to
now other than to direct their oil to China,” said China slipped in May, according to tanker-track-
Carole Nakhle, chief executive of London-based ing data. Iraq, the saudis’ biggest Persian Gulf
consultancy Crystol Energy. It’s still risky rival for exports to China and India, pumped
because anything that derails China’s economic more than it pledged under the OPEC deal. The
recovery from the virus could sap oil demand, saudis largely met their promised reductions
she said. and said they’ll cut even more than agreed in
In absolute terms, flows to China were almost June.
unchanged in May even as total shipments the export picture for June could show
slumped by about 4.5 million barrels a day. another decline in overall flows and there’s no
saudi Arabia, the world’s top exporter, sold guarantee China will be immune.
almost a third of its crude exports to China in state oil producer saudi Aramco has already
May. The region’s next-biggest producer, Iraq, indicated it will trim shipments to Asia as well as
sent around half its shipments to the country, to the U.s. and Europe.
which is a record. Oil pricing for July, which Aramco had just
China, where the virus emerged, is regaining released this week, gives an indication which
its thirst for energy even while the pandemic markets the company is targeting for sales. (see
continues to throttle consumption elsewhere. separate story)™

Week 23 10•May•2020 www. NEWSBASE .com P11