China Demand Off 8%
Saudi Arabia shipped 5.7% less oil overseas last year led by a decline in China, its biggest customer in Asia, reports Bloomberg. The data, which was provided by Joint Organization Data Initiative, showed that shipments from OPEC’s biggest exporter averaged 7.11 MMBOPD in 2014, down from 7.54 MMBOPD in 2013, representing a three year low. In December, exports dropped 5% from November to 6.9 MMBOPD.
“2014 was a tough year for Saudi Arabia and OPEC,” said John Sfakianakis, head of Middle East at Ashmore Group Plc, a London-based money manager. “Demand is sluggish, the U.S. is importing less, China’s economy is not growing by double digits, and supply from outside OPEC was not slowing down.”
China demand softens
China, Saudi Arabia’s largest customer in Asia, cut imports of Saudi crude by 7.9% in 2014, while it increased imports from Iran, Iraq, Kuwait, Angola and the U.A.E, according to official Chinese data. This news comes despite a decision by Saudi Arabia to cut prices to their lowest point versus benchmarks for Asian markets in over a decade.
“When you see your shipments to China decline, you have to be worried about your market share,” Sfakianakis said. The falling crude exports could help explain the decision to lower prices to Asian markets as OPEC’s largest producer looks to protect its market share in global markets, said Sfakianakis.
Sfakianakis said that Saudi Arabia needs to keep exports at a minimum of 7 MMBOPD in order to pay for its $229 billion 2015 budget. Brent must average $80/bbl this year for the budget to breakeven as well. Midday Brent April contracts were trading at about $60 per barrel.
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