China’s purchase of more than 26 million barrels in a matter of days sits on top of its normal Gulf buying of around 5.5 million barrels a day through formal channels, making this a genuine surge rather than routine restocking, and it lands alongside Germany’s own diesel and gas reserve rebuild, suggesting major economies on both ends of the supply chain are moving to lock in barrels while they can. Saudi Arabia’s decision to cut its official selling price discount to minus 1.5 dollars a barrel on Monday looks like the direct trigger, making Gulf crude notably cheaper and pulling in both state buyers and independent refiners. With teapot refiners also active in the tender activity, the buying looks broad based rather than confined to one type of buyer, and it comes at a moment when Iran related disruption is already tightening the wider market, raising the question of whether China is securing supply ahead of further Gulf tightness.
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China bought more than 26 million barrels of Middle East crude in days, well above normal, after Saudi Arabia cut its official discount to minus 1.5 dollars a barrel on Monday.
Summary:
- China bought more than 26 million barrels of Middle East crude in a matter of days, described as well above normal levels
- The barrels were bought for July and August delivery via tenders and one off purchases from Qatar, Saudi Arabia, the UAE and Iraq
- Saudi Arabia’s official selling price discount was cut to minus 1.5 dollars a barrel on Monday, seen as a direct trigger for the surge
- China’s regular Gulf buying before the war ran at about 5.5 million barrels per day through formal channels such as Saudi Aramco
- The tender activity sits on top of that existing baseline of purchases
- Independent teapot refiners were also active in the tender activity, alongside the Saudi discount move
China has bought more than 26 million barrels of Middle East crude in a matter of days, a pace of purchasing described as well above normal, as buyers move to take advantage of a deepening discount on Saudi barrels.
The purchases, covering July and August delivery, were made through a mix of tenders and one off deals with Qatar, Saudi Arabia, the UAE and Iraq, according to the reports. The scale of the buying stands out because it sits on top of China’s existing baseline of Gulf purchases, which ran at around 5.5 million barrels per day through formal channels such as Saudi Aramco before the outbreak of the Iran war.
The immediate trigger appears to be Saudi Arabia’s decision on Monday to cut its official selling price discount to minus 1.5 dollars a barrel, making Gulf crude notably cheaper and prompting both state linked buyers and independent teapot refiners to move quickly. The combination of a steeper discount and active tender activity from smaller refiners points to broad based demand rather than a single large buyer taking advantage of the price move.
The surge in Chinese buying comes as Germany separately moves to rebuild its own energy buffers, with its stockpiling agency EBV tendering for diesel to refill strategic reserves and the country’s Economy Ministry drawing up plans for a new state owned gas reserve. Taken together, the two developments suggest major economies at both ends of the global energy supply chain are positioning to secure supply, whether through direct crude purchases or refined product and gas stockpiling, at a time when the Iran conflict continues to disrupt shipping through the Strait of Hormuz and cloud the outlook for supply.
Whether China’s buying reflects opportunistic purchasing of cheap barrels or a more defensive move to build inventory ahead of further Gulf disruption remains to be seen, but the scale and speed of the activity mark a clear shift from the routine pace of purchases that had prevailed before the recent escalation.
This article was written by Eamonn Sheridan at investinglive.com.
