China switches oil buying towards African suppliers

According to international press reports, the current weakness in global oil benchmark Brent has prompted China to buy more crude from Africa.

Chinese imports from Africa are expected to jump to 6.51 million tonnes (47.5 million barrels) in July, up about 41% from June, according to data compiled by Thomson Reuters Oil Research and Forecasts.

While cargoes from South Sudan have increased by 8%, the bulk of the increase will come from Angola, China’s top supplier in Africa, which is expected to ship 3.4 million tonnes in July, up from 2.88 million in June, the forecast team said.

The dynamic that has driven the shift is that crudes priced off Brent, such as those from Angola, have become cheaper relative to those priced off Dubai, such as Saudi grades and Russia’s ESPO.

The result is that supplies from the world’s two largest oil producers, Saudi and Russia, are under pressure and likely to see price cuts. Saudis, said Thomson, may cut their official selling prices (OSP) for crudes for Asian refiners when September-loading prices are released early in August.