China’s oil demand could falter as Saudi pipeline shutdown raises costs
Supply relatively insulated in short term, but refiners could cut run rates amid rising crude prices, freight costs, analysts say
As the shutdown of Saudi Arabia’s major oil pipeline tightens global crude supply, shipments to China remain relatively insulated in the near term, though rising prices and freight costs are set to dampen demand, according to analysts.
Drone attacks launched from Iraq forced Saudi Arabia to shut its East-West pipeline, which connects its eastern oilfields to Yanbu port on the Red Sea and serves as a vital bypass around the Strait of Hormuz, where transit remains disrupted.
The closure late last week has sent oil prices higher, with Brent crude rising around 3 per cent to US$107.72 a barrel at midday on Monday. While the disruption threatens global crude supply, flows to China are expected to remain relatively unaffected.
“The impact on China is largely indirect, as Chinese refiners have stopped loading Saudi crude from the Red Sea since August,” said Emma Li, lead China oil market analyst at energy firm Vortexa.