Crude oil imports in Asia have been nothing to write about so far this year. But the tide is turning, and volumes are beginning to climb. The top contenders for the Asian supplier crown: Russia and Saudi Arabia.
China, the world’s biggest importer of crude, saw a 5% decline in its foreign oil shipments over the first two months of the year. The average daily stood at 10.38 million barrels, down from 10.74 a year earlier. The chief reason for the decline, however, was not organic demand death. It was the last round of sanctions that the Biden administration managed to slap on Russia, specifically targeting tankers.
India, the other big oil importer in Asia, also saw lower import volumes, specifically from Russia, over the first two months of the year. Average daily volumes were down by 14.9% in February from a month earlier, while Iraqi imports rose to fill the gap, along with overall imports from the Middle East.
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Now, however, things are changing because oil traders have, as always, found ways to skirt sanctions. Reuters’ Clyde Russell reported this week, citing Kpler data, that both China and India were buying more Russian oil this month than they did in the two prior ones. Russian oil flows to India were set to increase to 1.92 million barrels daily, up from 1.43 million barrels daily in February. Flows to China were set to rise more modestly, from 969,000 barrels daily in February to 973,000 barrels daily this month.
It’s not just Russian crude, either. The world’s top Asian importers of crude were also stepping up their purchases of Saudi oil. China will import some 1.64 million barrels daily from the kingdom this month, which would be up from 1.21 million barrels daily in February and 1.33 million barrels daily in January, according to the Kpler data. It would also be the highest daily Saudi oil import volume since August 2023.
India, meanwhile, is receiving crude oil arrivals at a rate of 532,000 barrels daily this month, but according to Russell, this is not the final figure because there are more cargoes contracted for deliveries by the end of March. The February average for Saudi oil shipments to India stood at 679,000 barrels, which was the lowest since August 2024. The Reuters columnist also suggested a stronger rebound in Saudi shipments to India in April after OPEC+ adds some barrels to its overall production.
OPEC+ has proven time and again that assuming the rollback of production cuts will indeed happen is a risky move, and indeed, Russia’s top OPEC man, Alexander Novak, has said that the April meeting of the group may decide to delay the return of those 138,000 barrels daily if the price of oil is not right. Still, flows of both Russian and Saudi crude to Asia’s big import hubs are on the rebound and besides sparking talk of a market share battle—per Russell—it might also spark some thought about peak demand and whether it is a real thing.
Speculation about China’s oil demand has been particularly abundant lately. Virtually all demand forecasts see an imminent peak in China’s oil demand growth. Some even suggest this peak has already arrived. The most commonly cited reasons are EVs and LNG trucks eating into oil demand from the transport fuel sector. Yet demand from petrochemical companies is on the rise, driving predictions that the oil demand picture will rather change than shrink, with petrochemicals overtaking fuels as the main source of growth.
While forecasters watch China, India is nowhere near its peak oil demand. The subcontinent is seen as overtaking China as the biggest global oil demand growth driver in the near future, “fuelled by strong growth in its economy, population and demographics,” according to the International Energy Agency, which sees the country’s oil demand growth at a rate of 1.2 million barrels daily over the next five years.
Clearly, these two are key markets for all oil exporters. They are also key factors when forecasting oil prices. What they are not, it seems, the oil market equivalent of Helen of Troy. Neither Russia nor Saudi Arabia appears to be locked in a market share battle for China and India. Rather, they are taking an “Export and let export” approach to their key oil markets in Asia.
Reuters’ Russell pointed to Saudi Arabia’s latest oil price cuts as an indication that they were fighting for market share, but based on previous price cuts, it rather seems to be the standard reaction of Saudi price-setters to global price trends. A market share battle would have been great for oil bears. There just doesn’t seem to be one going on right now. Asia’s demand for crude is rebounding, and suppliers are responding in the most obvious way possible: by stepping up the supply.
By Irina Slav for Oilprice.com
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