Saudi Arabia's crude oil allocations to China are projected to hit a record low in July as high prices depress demand, forcing Chinese refiners to curb processing runs and draw down domestic stockpiles, Reuters reported Thursday, citing sources.
Saudi Aramco is scheduled to supply just 12 million barrels of oil for July loading to Chinese buyers, equivalent to roughly 387,096 barrels per day, the report said.
This smaller allocation confirms that Chinese refiners are actively resisting high-priced barrels, opting instead to draw down existing domestic crude inventories and implement steep processing run cuts to manage heavy processing losses.
Meanwhile, Aramco slashed its July Official Selling Prices to Asia across all grades by a substantial $6.00 per barrel, bringing its flagship Arab Light premium down to $9.50 per barrel over the regional Oman/Dubai benchmark.
However, even with the aggressive adjustment, Aramco's sharpest price cut in four years, the final cost of Persian Gulf barrels remains significantly above pre-war baselines, presenting an unsustainable economic hurdle for Asian refining complexes.
Compounding the commercial headwinds, maritime logistics out of the Persian Gulf remain highly restricted due to Iran's ongoing blockade of the critical Strait of Hormuz chokepoint.
While Saudi Arabia has managed to partially bypass the naval bottleneck by rerouting a significant volume of its export flows overland via pipelines to its Red Sea Yanbu port terminal, the operational friction has further squeezed available supply flexibility.
Saudi Aramco did not respond immediately to' request for comments.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)