Weak demand in China will lead to lower supply from the world’s top crude exporter, Saudi Arabia, to the world’s largest crude importer in December, trading sources told Reuters on Monday.

The drop in Saudi supply would come despite the fact that the Kingdom has reduced its official selling prices (OSPs) for crude loading in December for Asia.

December will see a second consecutive month of lower Saudi deliveries to China, estimated at a total of 36.5 million barrels. This would be down from 37.5 million barrels expected this month, and 46 million barrels in October, according to trade data compiled by Reuters.

The Saudi crude oil supply to China next month would also be the lowest monthly volume since July, as Chinese state-owned giants PetroChina, Sinopec, and Sinochem are expected to lift fewer cargoes from the Kingdom.

Aramco, the Saudi state giant, last week reduced the price of its crude that will be loading for Asia in December.

Saudi Arabia’s flagship crude grade, Arab Light, saw its OSP cut by $0.50 per barrel, to $1.70 a barrel above the Dubai/Oman benchmarks, from which Middle Eastern exporters price their crude for the Asian markets.

The Kingdom also slashed the OSPs of all its grades loading for Asia—Arab Extra Light, Super Light, Arab Medium, and Arab Heavy, although the reductions in the heavier grades were lower than those for the lighter crudes.

Chinese crude oil imports have been underwhelming this year, with October marking the sixth consecutive month in which cargo arrivals have lagged behind the imports in the same months of 2023, official Chinese data showed last week.

Reduced capacity at a PetroChina refinery and continued weak demand from China’s independent refiners, the so-called teapots, weighed on the imports into the world’s top crude importer in October.

Weaker-than-expected Chinese demand may have been the reason why the OPEC+ group delayed the beginning of the easing of its production cuts to January 2025, from December 2024, although the cartel and its allies did not give a specific reason for the decision.

By Tsvetana Paraskova for Oilprice.com / Nov 11, 2024