China's Saudi oil imports seen up 11% next year - sources

Saudi supplies likely average 1m bpd in 2011; Saudi eyes moderate but more sustainable growth
CHINA IMPORTS: Chinas crude oil imports from Saudi Arabia will likely rise 11 percent next year to hit one million barrels per day (Bloomberg Images)
By Reuters
Wed 24 Nov 2010 03:00 PM

China's crude oil

imports from Saudi Arabia will likely rise 11 percent next

year to hit one million barrels per day, a pace slightly

faster than 2010 but off the heady increases in previous

years, industry officials told Reuters.

China's refining expansion is expected to moderate next

year and rising competition of mostly Russian oil via a

Siberian pipeline means import growth for the high-sulphur

Saudi oil would be limited, they said.

At one million bpd, China stands a touch behind the United

States as the Kingdom's second-largest crude buyer. US

Energy Information Administration data showed Riyadh supplied

1.07 million bpd in the first eight months of 2010 to the

U.S., largely flat from a year earlier.

State-run Saudi Aramco has rolled over its evergreen

contracts with Chinese refiner Sinopec Corp and

PetroChina for next year and expects actual supplies

to grow 100,000 bpd or so from this year's average of 900,000

bpd, industry officials said.

"The market was really worried earlier about 2010, which

turns out to be much more robust than thought. Now we have a

high base forecasting next year's growth," said an industry

source with close knowledge of oil trade between Riyahd and

Beijing.

"A growth of around 10 percent is both realistic and more

sustainable for Saudi Arabia."

In 2008 Saudi supplies to China rallied nearly 40 percent

to about 730,000 bpd, as China went through a major

stockpiling year for the Beijing Olympics Games, followed by a

15-percent rise in 2009 when China added several big new

refineries including one partly owned by Aramco.

China, the world's second-largest oil user, may finally

enter a relatively quiet year in its long refining expansion

boom that started nearly two decades ago, by possibly adding

less than 300,000 bpd new working capacity next year, or just

over 3 percent of China's total oil demand.

That came off an average of 400,000-450,000 bpd additions

each year seen in the previous few years.

And a chunk of next year's new capacity would be

processing lower sulphur oil from Russia.

The start of the China branch of East Siberian Pacific

Ocean (ESPO) pipeline since earlier this month that aims to

reach a full designed capacity of 300,000 bpd as early as

beginning of 2011 is poised to cap the growth in competing

supplies from the Middle East, traders have said.

While traders are still trying to gauge the exact amount

of incremental Russian supplies, as the ESPO oil is set to

replace some of the shipments now coming to China via rail,

top Middle East exporters like the Saudis are facing up to the

challenge.

Saudi Arabia, the most influential member of the

Organization of the Petroleum Exporting Countries (OPEC), has

been restoring full contracted volumes to most Asian buyers

this year after curbs for most of 2009 that were applied in

line with OPEC's record output cuts.

In October, OPEC made no change to formal output levels,

keeping intact a supply policy that has served it well for

nearly two years.

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