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Saudi oil exports to China fell sharply in Q2 2025 due to seasonal refinery maintenance, inventory drawdowns, and strategic shifts ahead of OPEC+ supply increases.
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Crude oil and tanker freight markets faced downward pressure, with Brent crude dipping below $80 per barrel and significant rate declines across VLCC, Suezmax, Aframax, and clean tanker segments.
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Despite current weakness, Chinese crude imports may rebound in H2 2025 amid refinery expansions, government stimulus, and potentially competitive pricing from Saudi Arabia.
In the second quarter of 2025, Saudi crude oil exports to China declined sharply, influenced by both seasonal and structural factors. Chinese refineries typically undergo scheduled maintenance during April and May, temporarily lowering crude oil demand. Concurrently, the country drew down inventories built up in the first quarter, when importers front-loaded purchases in anticipation of market changes like price hikes or supply disruptions. This import strategy aligned with an important development in global supply: OPEC+ announced in late April it would gradually unwind voluntary production cuts starting in June, increasing output by 411,000 barrels per day. Led by Saudi Arabia and Russia, this move aimed to reclaim market share and boost global demand as oil prices softened due to economic uncertainty, according to Breakwave Advisors.
Crude Oil Market Pressures and Price Outlook
The OPEC+ announcement triggered a significant drop in global crude prices, with Brent crude falling nearly 9% in April—its steepest decline since November 2021—pushing prices below $80 per barrel. Analysts now expect Brent prices to stay under pressure throughout 2025, averaging between $75 and $78 per barrel. Looking ahead to 2026, forecasts from Goldman Sachs, JPMorgan, and the IEA project continued softness driven by sluggish industrial growth in China and Europe, rising non-OPEC output (especially from U.S. shale), and the risk of OPEC+ members failing to maintain output discipline.
Prospects for Recovery in H2 2025 Chinese Imports
Despite the current decline, several indicators point to a potential rebound in Chinese crude imports during the second half of 2025. Large-scale refining projects such as Zhejiang Petrochemical Phase II and Shenghong Petrochemical are set to increase crude throughput, necessitating higher feedstock imports. Additionally, new government stimulus programs targeting infrastructure and manufacturing—both energy-intensive sectors—are expected to drive up domestic demand for refined products and, by extension, crude oil. Should crude prices fall below $75 per barrel, China may also capitalize on the opportunity to replenish its strategic petroleum reserves, particularly if Saudi Arabia offers favorable pricing and contract terms.
Tanker Freight Market Under Pressure Amid Weakened Demand
Tanker freight market sentiment weakened further in early May, especially in the Suezmax segment. VLCC rates on the Middle East Gulf–China route fell to WS 60, a 12% weekly drop. Suezmax routes from West Africa to Europe declined 18%, falling below WS100, while the Baltic–Mediterranean route slipped 17% to WS110. Aframax rates in the Mediterranean fell below WS170, down 7% weekly. Clean LR2 rates from the Arabian Gulf dropped to WS110—a 25% monthly decline. Although Panamax Carib-to-USG rates rose slightly to WS180, they remained 10% lower than a month ago. MR1 and MR2 rates also declined across major trade lanes, with MR1 Baltic–Continent down 7% and MR2 Continent–USAC falling 15%.
Fleet Movement and Tonne-Day Trends Reflect Sluggish Activity
Fleet activity and tonne-day growth indicators underscore weak market fundamentals. VLCCs at Ras Tanura rose well above the yearly average, while Suezmax ships in West Africa doubled the annual trend, creating oversupply risks. Aframax activity in the Mediterranean remained well below historical norms. Tonne-day growth—a key proxy for demand—fell sharply in early May, particularly for VLCCs and Aframax tankers. While Suezmax tonne-days stayed near average, the broader market sentiment remained bearish. Panamax and MR tonne-days also trended downward, with no signs of near-term recovery.
Conclusion: Short-Term Weakness, Long-Term Potential
The downturn in Saudi oil exports to China in Q2 2025 reflects a confluence of seasonal refinery slowdowns, strategic inventory use, and evolving global supply dynamics. The OPEC+ decision to increase output has pushed prices downward, further influencing trade and freight markets. However, a rebound in Chinese crude imports later in the year remains possible as refinery utilization picks up, economic stimulus supports demand, and price-sensitive buyers consider restocking reserves, especially if Saudi crude becomes more competitively priced.
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Source: Breakwave Advisors
