Saudi Arabia will cut oil supplies to China in July in favor of other Asian countries, Bloomberg reports, citing sources.
Among the countries that will receive additional raw materials are Japan, South Korea, Thailand and India. At the same time, the volume of deliveries to some of them will be more than originally requested, the agency’s sources noted.

Many buyers in Asia requested Saudi Aramco (TADAWUL:2222) to increase supplies against the background of the desire to find alternative sources of energy supply to Russia.

Meanwhile, Saudi oil is in high demand in Asia, even though the price increase for all exported grades for the countries of the region is higher than initially expected. The reason for this demand is the higher marginality of refining compared to oil from the United States or the North Sea, Bloomberg writes.

Japan, South Korea, Thailand and India will receive the required volumes of oil, and some will even receive additional supplies, according to representatives of refineries (refineries).

Saudi Aramco usually does not tell customers the reason for the volume reduction.
But it is perfectly visible on the graph.
Iran and Iraq were the main oil suppliers of Middle Eastern oil to Europe.
After the introduction of sanctions against Iran, oil supplies to Europe from Russia have obviously increased.
Otherwise, there is simply nowhere.

Iran continues to be under Western sanctions, and will not be able to replace the falling volumes of Russian oil in Europe.
The Iranians are even dismantling security cameras at their nuclear facilities. The agreement is still very far away.
OPEC+ firmly follows the precepts of the Vienna Agreement on limiting oil production.
There is simply nothing to replace the falling volumes of Russian oil, except for the redistribution of flows.
There are opportunities to increase the supply of Middle Eastern oil to Europe, since many varieties from the region are well combined with the Russian flagship Urals grade (31 ° API, 1.5% sulfur).
Therefore, the redistribution of oil supplies begins:
sub-sanctioned Russia is increasing oil supplies to China;
The Saudis are reducing supplies to China, increasing supplies to Europe.
But we know from the rules of arithmetic that the sum does not change from changing the places of the terms.
This means that oil prices will remain at the same high level of more than $ 100/bbl for a long time, which implies additional profits for oil-producing countries.
The equilibrium price of oil, which suits the producing countries and oil consumers, is at the level of about 70 US dollars/ bbl.
At least about $ 30/bbl is the oil and gas windfall of the budget of the Russian Federation.

Many Asian buyers asked Aramco for more oil during the so-called nomination process held this week, as they were looking for alternatives to Russian grades.
Saudi oil supplies in July were particularly in demand by many in Asia due to the high refining margins.
The differential of futures swaps (EFS) between Brent and the Dubai Stock Exchange has grown to more than 10 US dollars/ barrel after the start of the special operation of the Russian Federation in Ukraine and remains high against the background of subsequent fluctuations.
It seemed that arbitration transactions would increase significantly.
But so far, there has been no large-scale displacement of Middle Eastern oil from their main Asian markets.
Despite the higher-than-expected increase in prices from the kingdom, buyers still consider its cargoes more affordable than supplies from the North Sea and the United States, after the fall in base prices in the Middle East compared to London and American benchmarks.
The cost of the main Arab Light grade supplied to Asia will increase by US$ 2.1/bbl, the premium to the basket of Oman and Dubai oil grades will be US$ 6.5/bbl.
Prices for oil exported to the United States in July will remain at the level of June.

China and India continue to be major buyers of Russian oil, receiving large discounts for their willingness to continue importing such grades of oil as the flagship Urals and ESPO from the Far East.
The trade turnover between Russia and China in January-May 2022 increased by 28.9% year-on-year, reaching $65.81 billion, a positive balance for Russia ($16.69 billion).
About 70% of the value of goods imported from Russia to China is accounted for by oil, natural gas and coal.

According to the Director of the CNPC Petroleum Research Department , D. Jiaquan:

Consumption in China, the world’s largest importer of crude oil, could jump 12% in the 3rd quarter compared to the 2nd;
along with the promised government incentives, this will increase demand by 1.6 million barrels per day quarterly from July to September;
it is expected that year-on-year demand in the 3rd quarter will grow by 5%