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Three state-run Chinese refineries face delays in Saudi crude shipments in Q4

Highlights

Refinery in southern China to load Arab Medium crude 1 week late

Arab Extra Light loading delayed by 1-2 weeks for second refiner

Full Saudi output capacity recovery may take two months

Singapore — Three state-run refineries in China expect delays in Saudi crude shipments in the fourth quarter, as loading schedules for some October term contract barrels have been pushed back due to the recent output disruption, said refinery sources with direct knowledge of the matter Wednesday.

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A refinery based in South China operated by PetroChina said it was due to load Arab Medium and Arab Light crude in a VLCC in late October. However, the refiner has recently been notified by Saudi Aramco that lifting of the October term barrels would be delayed by one week, a company source told S&P Global Platts.

The refinery typically procures one VLCC cargo, or around 2 million barrels of crude oil from Saudi Arabia each month, the source said.

A state-owned refinery based in northern China said that the loading of its term Arab Extra Light crude will be delayed by one or two weeks, a company source with knowledge of the matter said. The refiner was originally scheduled to load 1 million barrels of the light sour Saudi crude oil in the second half of October, the source said.

Elsewhere, a refinery in South China operated by Sinopec received a notice from Saudi Aramco that it is unable to supply Arab Extra Light crude, and its monthly contract Arab Light crude supply will be switched to Arab Heavy as a substitute grade for September loading, a company source said.

In addition, "Arab Extra Light due for October loading will be replaced by Arab Medium," he added.

The source also said that the loading of its term Saudi crude barrels for October has been delayed by a week.

"The Arab Light and Arab Extra Light will be generally switched with Arab Medium/Heavy, but this will also depend on the needs from the refinery," said a source at another Sinopec-operated refinery in South China.

Saudi Arabia has been stepping up efforts to restore its crude oil production capacity to full, but some of the country's exports to Asian customers would still be affected in the near term, Asian market participants said.

"[Various Asian refiners are] saying loading delays are expected, but no change in volume," said a sour crude trader based in Singapore with knowledge of the matter.

"Chinese refiners are getting delays and switching to Arab Medium and/or Arab Heavy," a trading source at a Northeast Asian refiner with knowledge of the matter said.

Related infographic: Attacks lay bare Saudi Arabia's oil vulnerability

Saudi Arabia's energy minister Prince Abdulaziz bin Salman told a press briefing Tuesday that the Middle Eastern producer has already restored more than half of the oil production capacity damaged in Saturday's attacks on the two facilities.

The OPEC kingpin plans to restore its production capacity to 11 million b/d by the end of September and recover its full capacity of 12 million b/d two months later, Abdulaziz said.

"They could say production capacity is 11 million or 12 million b/d, but can you process 12 million b/d of crude and bring it to consumers? That's the question," said Iman Nasseri, managing director for the Middle East at FGE Energy.

"At the moment, bringing everything back to normal by the end of September is very unlikely."

--Analyst Daisy Xu, daisy.xu@spglobal.com

--Gawoon Philip Vahn, Philip.Vahn@spglobal.com

--Eesha Muneeb, eesha.muneeb@spglobal.com

--Edited by Shashwat Pradhan, shashwat.pradhan@spglobal.com