Saudi oil flows to China see Q2 2025 drop due to seasonal, structural factors

Investing.com -- A significant decrease in oil flows from Saudi Arabia to China was observed in the second quarter of 2025, according to maritime analytics firm Signal Ocean. The decline is said to be due to a mixture of seasonal and structural influences.

China’s oil refineries typically undergo scheduled maintenance during the second quarter, especially in April and May. This period of maintenance temporarily reduces the nation’s crude oil requirement, leading to lower import volumes. Furthermore, stockpiles likely accumulated in the first quarter were probably drawn down, as Chinese importers had proactively increased purchases in anticipation of market shifts such as price increases or supply disruptions.

A pivotal development in global oil supply coincided with this front-loading of imports. In late April 2025, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced a gradual easing of its voluntary production cuts, set to commence in June with an extra 411,000 barrels per day of crude entering the market. Saudi Arabia and Russia, the bloc’s leading producers, were instrumental in this decision, aimed at regaining market share and stimulating global demand as oil prices began to soften amid economic uncertainties.

Following the OPEC+ announcement, crude oil prices experienced a significant drop. Brent crude saw its sharpest monthly fall since November 2021, decreasing nearly 9% in April alone. This pushed prices below the crucial $80 per barrel mark, indicating a bearish market sentiment. Analysts now predict that Brent will remain under pressure for the rest of 2025, with average prices expected in the $75–78 range. Major institutions such as Goldman Sachs, JPMorgan, and the International Energy Agency (IEA) forecast continued price weakness into 2026 due to slow industrial growth in China and Europe, increased output from non-OPEC producers, particularly U.S. shale, and potential oversupply if OPEC+ compliance diminishes.

Despite the Q2 downturn, a recovery in Chinese crude oil imports is anticipated in the second half of 2025. Several major refining projects, including Zhejiang Petrochemical Phase II and Shenghong Petrochemical, are set to increase operations in the upcoming months. This will boost the country’s crude throughput and necessitate higher feedstock imports. Additionally, the Chinese government is planning new economic stimulus measures focused on manufacturing and infrastructure, both of which are energy-intensive sectors. These measures are expected to support domestic demand for refined products and, consequently, crude oil imports.

If crude prices continue to remain subdued, particularly under $75 per barrel, China might take the opportunity to replenish its strategic petroleum reserves. Beijing is continuing to diversify its sources of crude, increasing purchases from Russia, the UAE, and potentially Iran, but remains highly price-sensitive. If Saudi Arabia offers competitive pricing and favorable contract terms, Chinese refiners could restart or even increase purchases from the Kingdom (TADAWUL:4280) in the latter half of the year.

However, recent U.S. sanctions aimed at Chinese independent refiners, specifically Shandong Shouguang Luqing Petrochemical and Shandong Shengxing Chemical, for importing Iranian oil have disrupted operations and deterred other refiners from similar purchases. Despite these challenges, China’s commitment to diversifying its crude sources remains evident, with continued imports from Russia, the UAE, and other countries.

In conclusion, the Q2 2025 decline in Saudi oil flows to China reflects a combination of seasonal demand reduction, strategic inventory adjustments, and evolving global supply dynamics. The OPEC+ decision to increase output has put downward pressure on prices, while geopolitical and macroeconomic uncertainties continue to influence global demand. However, signs suggest a potential rebound in Chinese imports from Saudi Arabia later in the year, contingent on refinery utilization, economic stimulus, and the relative attractiveness of Saudi crude compared to other suppliers.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.