Saudi Arabia's Fuel Oil Imports from Russia Skyrocket Nearly 10 Times Year-on-Year

Saudi Arabia's fuel oil imports from Russia in the first half of this year have already exceeded the total for last year. Besides acting as a middleman to earn the price difference, this is also related to production cuts...

According to Kpler, a commodity data analytics company, Saudi Arabia's discounted Russian fuel oil imports in June reached a historical high, nearly ten times the year-on-year growth, to meet the demand for summer power generation and maintain crude oil exports under production cuts.

For Russia, despite Western sanctions preventing it from accessing major markets including Europe, the country's growing oil trade with the world's largest crude oil exporter has allowed it to continue supplying oil to global buyers.

Kpler's data shows that Saudi Arabia imported a record 910,000 tons (193,000 barrels per day) of fuel oil from Russia in June.

After the European Union banned the import of Russian oil products, Saudi Arabia increased its fuel oil imports from Russia this year.

The data shows that Saudi Arabia's fuel oil imports from Russia in the first half of 2023 reached 2.86 million tons, exceeding the 1.63 million tons for the whole of 2022.

The Saudi Ministry of Energy did not respond to requests for comment. The state-owned oil giant Saudi Aramco also refused to comment.

Royston Huan, a fuel and feedstock analyst at consulting firm Energy Aspects, said that Saudi Arabia mainly imports high-sulfur fuel oil (HSFO) from Russia, which is mostly shipped to fuel power plants.

Saudi Arabia said this month that it will extend its plan to cut production by 1 million barrels per day for the second consecutive month in August to support oil prices, as part of an agreement reached by OPEC+.

Huan said, "We believe that the increase in imports of Russian fuel oil is related to production cuts, as Saudi Arabia will prioritize crude oil exports, so it chooses to maintain the operation of the public utilities sector with fuel oil instead of crude oil."Traders and analysts say that the OPEC-leading country has been importing cheap Russian fuel oil and diesel, and increasing exports to gain higher profits.

Kpler data shows that due to the improvement in fuel oil margins, Saudi fuel oil exports in July are expected to increase from 750,000 tons in June to 1.2 million tons.

According to Refinitiv data, the Asian HSFO crack spread was $7.83 per barrel on Wednesday, up nearly 50% from the beginning of the second quarter.

The crack spread refers to the difference between the price of petroleum refining products obtained by refiners through refining and processing and the price of their crude oil purchases.

Analysts at consulting firm FGE said in an email, "The recent strong HSFO crack spread may be due to concerns about tight HSFO supply after Saudi Arabia extended the voluntary production cut of 1 million barrels/day."