Global crude supply curbed by Saudi as China lifts imports

Global crude/condensate loadings fell to around 47mbd in August, the lowest level since June 2022, as loadings from Saudi Arabia fell by almost 1.1mbd m-o-m (see chart). The drop in Saudi loadings means that the Kingdom’s contribution to total global seaborne flows is at a multiyear low. This drop underpins Saudi Arabia’s commitment to voluntarily cut production, but the key question is how sustainable this is.

 Global crude/condensate loadings (LHS, mbd) vs. Saudi Arabia loadings (RHS, mbd)

On a seasonal basis, global refined products exports trend higher in the final quarter, as refinery runs pick up (post refinery maintenance and seasonal distillate demand), usually implying higher crude import activity. If this trend is to continue this year, and early indications suggest it will, that would mean the global market would tighten even further. With that in mind, it comes as little surprise that Brent and WTI backwardation is the strongest it has been in 10 months.

Loadings vs Arrivals divergence

Looking at global crude flows on an arrivals basis, one of the most important observations in the latest data is the absence of any sharp decline in August, unlike what we see in loadings data above. August arrivals are around 600kbd higher m-o-m, with higher Chinese imports a key contributor to this. A recent Loading link... explains in more detail how this divergence in loadings vs. arrivals is due to the timing of a sharp rise and then fall off in Saudi crude on the water.

 Global crude/condensate arrivals (LHS, mbd) vs. China arrivals (RHS, mbd)

At a global level, crude arrivals in August stood at almost 49mbd, almost identical to the average across the previous seven months this year. But China, after a slump in July, received almost 1.3mbd more crude (m-o-m) to total almost 13mbd. With Chinese product export quotas now confirmed, even if they are slightly lower in volume than market expectations, Chinese product exports could continue climbing – receiving support from wider Asian diesel, jet and gasoline crack spread. 

Looking ahead to the end of the year, if Chinese products exports continue along their current trajectory, amid a global pickup in (post-maintenance) refinery runs, the ‘voluntary’ aspect of Saudi’s production cut would be put to the test. In such a scenario, it may be possible that the full 1mbd amount isn’t maintained for the full balance of the year, especially if prices climb further from current levels.