Singapore — The first vessel carrying Saudi Arabian crude sold to an independent refiner in China arrived at the port of Longkou on Friday.
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The 730,000-barrel cargo of Arab Heavy crude was sold on an FOB basis by Saudi Aramco to Chambroad Petrochemical in what was the first sale by the world's top oil exporter to China's emerging independent refining segment.
The cargo was loaded onto the Aframax Alyarmouk on May 15 from Okinawa and arrived into Longkou on Friday, according to cFlow, Platts trade flow software.
Saudi Aramco has leased storage capacity in Okinawa while Chambroad has a 70,300 b/d refinery in Shandong province, around 300 km from Longkou port.
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Saudi Aramco rarely sells crude in the spot market. It has, however, been supplying to China's state-owned refineries via term contracts. Aramco's move comes as the company lost its spot as China's top supplier last year to Russia, which has seized the opportunity to tap into the independent refinery sector.
MORE SUCH DEALS EXPECTED
More such deals between Saudi Aramco and Chinese independent refineries are likely to follow, traders said in recent days.
Dongming Petrochemical, Hongrun Petrochemical, Lihuayi Petrochemical and Kenli Petrochemical could be the next buyers, sources said.
Aramco has until now hesitated to sell crude oil to the independent refiners as it is not familiar with their credit profiles.
Market observers said earlier that the spot cargo sale to Chambroad is a test for Aramco to run through the financial and logistic procedures involved in selling to an independent refiner in China. The size of the deal and the shorter voyage from Japan to China has helped Aramco minimize its trading risks.
The deal was done by Saudi Aramco's Beijing office with approval from the headquarters in Dhahran, sources said.
Traders said earlier that the cargo for Chambroad has been priced on a FOB Okinawa basis but the exact pricing is confidential though it is likely linked to the OSP for Arab Heavy crude with an unknown differential.
Aramco normally sells crude oil based on its OSPs. Sunshine, the Singapore-based trading arm of Chambroad, is said to have translated the offer to a price linked to ICE Brent crude futures for the parent company, which is a common practice among independent refiners.
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