Russia and Saudi Arabia have been (relatively) quietly fighting for market share in China ever since oil prices started their downward spiral in mid-2014—now the battle is heating up, and teapot refineries are what could tip the balance.
Though the Saudis had historically been China’s biggest oil supplier, Russia managed to take the top spot several times during that period, thanks to the so-called teapot refineries. This has now forced the Saudis to do something they’ve never done before—target teapots on the spot market in order to regain lost market share.
Teapot refineries rose to fame due to their greater processing flexibility as compared with state-owned Chinese oil giants. Last year, they finally won import quotas for crude, most of which they then export in the form of oil products.
Russia was quick on the uptake and until recently was the leading supplier to these teapots. Now, however, the Saudis have stepped up their game and have offered teapots spot oil contracts. That’s very unusual for Saudi Arabia, which prefers to trade its oil on the futures markets and at a fixed price–but the stakes seem to be high enough to justify this move.
By all means, Saudi Arabia has the upper hand in the latter, but Russia has a history of being patient and it’s used to tightening belts when times call for it, unlike the Saudis. Perhaps it could be a better idea for both to relax and look for other destinations of their oil, such as India. Before Iran gets there first.
Full article: Russia And Saudi Arabia Locked In Relentless Fight Over China’s Oil Market (OilPrice)