Saudi Arabia has strategically capitalised on oil refining profits by importing substantial quantities of Russian diesel at low prices and shipping record amounts to Singapore, where higher profit margins can be made, according to ship-tracking data. The move comes after Brussels banned imports of oil products from Russia in response to the invasion of Ukraine last February, forcing the Russian state to divert its previously targeted European market.
Industry analysts and traders have revealed that Saudi Arabia's Aramco, one of the world's largest oil companies, has seized the opportunity to increase its diesel exports to Singapore to record levels in May. This shift to the Asian market has allowed Aramco to capture a better net profit due to lower Asian supply during the maintenance season, while also taking advantage of the relatively tight supply of diesel in Singapore caused by refinery maintenance in the region.
Serena Huang, head of APAC analysis at Vortexa, an oil and gas operations data provider, told Reuters that this situation has created immediate arbitrage opportunities for operators to redirect shipments to the Singapore market. Russian gasoil shipments to Saudi Arabia are expected to reach 500,000 tonnes (3.7 million barrels) or more in May, with the majority reaching Ras Tanura, where one of Aramco's refineries is located. In addition, data from data solutions company Refinitiv, Vortexa and several industry sources indicate that the amount of gasoil shipped from Saudi Arabia to Singapore will reach an all-time high of 400,000 tonnes.
The increase in Saudi supplies is expected to help boost Singapore's diesel stocks, especially as exports from northeast Asia decline during the aforementioned refinery maintenance season, which runs from May to July. However, it remains unclear whether Saudi Arabia is stockpiling some of its own production and instead sending mainly Russian supplies through swaps, both of which meet standard diesel specifications.
Other trade sources and Refinitiv data suggest that shipments of Russian gasoil, with a sulphur content of 10 parts per million, are trading at discounts of around $30 per barrel, compared to 16 cents per barrel in Singapore. Last April, Saudi diesel exports worldwide reached an all-time high of 3.7 million tonnes, according to data from Kepler, the geospatial analysis and big data tool.
As Al Arab reports, going forward, Aramco's Jizan refinery in southern Saudi Arabia is expected to increase its diesel exports as crude oil flows stabilise. Saudi Arabia produces approximately 1.3 to 1.4 million barrels of diesel per day, of which almost 600,000 barrels are for the domestic market. Balancing its Asian and European commitments is crucial for Saudi Arabia.
Before the European ban, Russia was still the largest supplier of diesel, with 550,000 barrels per day. However, Moscow is now actively seeking alternative markets to Europe to offload its production and maintain revenues.
Moreover, the global gasoil market has seen an increase in supply since early 2023, driven by increased exports from China and the Middle East. Additionally, mild winters in Europe have dampened demand, resulting in lower prices.
As the Saudi kingdom takes advantage of the changing dynamics of the global diesel trade, the country's strategic moves to import Russian diesel and establish Singapore as a lucrative market have proved successful. These developments demonstrate the continuing evolution of the energy landscape, as geopolitical factors continue to determine trade patterns in the oil industry.