Saudi Arabia will boost contract crude sales by 10 percent to Asia's biggest refiner Sinopec this year as the world's top oil exporter cements its share of the world's fastest growing fuel market.
Riyadh is boosting exports to China for a third consecutive year, ensuring needs from the world's second-largest oil consumer are met, even as the kingdom stuck more closely to the late-2008 OPEC production targets than many of the group's other members.
It is unclear whether Saudi Arabia is increasing overall production to supply more to Sinopec or diverting supplies from customers elsewhere. China has driven global demand growth for the last decade and is coming close to eclipsing the United States as Saudi Arabia's biggest buyer.
China Petroleum & Chemical Corp (Sinopec) would import more than 550,000 barrels per day from Saudi Arabia in 2011, and China's total term contract volume would rise to a new record of at least 970,000 bpd, according to Reuters calculations based on data from industry sources. That compares to term contract volumes of around 920,000 bpd in 2010, although actual imports were a little less and came in at 892,800 bpd, according to customs data.
Sinopec has the requirement, growth continues, said a trader with a northeast Asian crude buyer. They are able to run Saudi crude well, perhaps blended with lighter grades, he said, adding that Saudi Arabia also offers the flexibility to provide greater volumes.
China's rising crude purchases come as Saudi Arabian oil minister Ali al-Naimi said on Monday this year could mark a turning point as demand from developing economies takes as big a share of the market as industrialised countries.
Naimi also said global oil demand was expected to rise between 1.5 million and 1.8 million bpd this year, a higher forecast than that given by the Paris-based International Energy Agency.
If Minister al-Naimi sees strong demand, it is a strong signal that Saudi Arabia sees little concern in raising supplies. That is the real message, JP Morgan analysts led by Lawrence Eagles said in a report on Monday.
The growth in oil demand would mainly be driven by Asia -- particularly China and India -- as well as the Middle East and Latin America, Naimi told an industry conference in Riyadh.
Sinopec took at least 500,000 bpd of Saudi crude last year. In addition to that, Aramco supplies about 240,000 bpd to the Fujian refinery, its joint venture with Sinopec. That volume would be steady this year, sources said. Saudi crude accounted for about a quarter of Sinopec's 3 million bpd of crude imports last year.
China's two other state oil refiners - Sinochem and PetroChina Co Ltd - will import 180,000-190,000 bpd in 2011, also steady from 2010. The IEA forecasts China would need an additional 450,000 bpd in 2011, about a third of the forecast 1.41 million bpd rise in global oil consumption. China's economy grew 10.3 percent in 2010, driven by robust domestic demand and exports.
China's total imports from Saudi Arabia of close to 1 million bpd this year would put Beijing just behind the kingdom's top client the United States, which in the first 10 months of 2010 imported an average 1.09 million bpd, according to the country's Energy Information Administration (EIA). China's total crude imports climbed to a record 4.79 million bpd in 2010, up by almost 18 percent from a year earlier.
In December, China's implied oil demand surged 19 percent to a record 9.6 million bpd, averaging 8.65 million bpd for the whole year, according to Reuters calculations based on preliminary official data.