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China Demand Off 8%

Saudi Arabia shipped 5.7% less oil overseas last year led by a decline in China, its biggest customer in Asia, reports Bloomberg. The data, which was provided by Joint Organization Data Initiative, showed that shipments from OPEC’s biggest exporter averaged 7.11 MMBOPD in 2014, down from 7.54 MMBOPD in 2013, representing a three year low. In December, exports dropped 5% from November to 6.9 MMBOPD.

“2014 was a tough year for Saudi Arabia and OPEC,” said John Sfakianakis, head of Middle East at Ashmore Group Plc, a London-based money manager. “Demand is sluggish, the U.S. is importing less, China’s economy is not growing by double digits, and supply from outside OPEC was not slowing down.”

China demand softens

China, Saudi Arabia’s largest customer in Asia, cut imports of Saudi crude by 7.9% in 2014, while it increased imports from Iran, Iraq, Kuwait, Angola and the U.A.E, according to official Chinese data. This news comes despite a decision by Saudi Arabia to cut prices to their lowest point versus benchmarks for Asian markets in over a decade.

“When you see your shipments to China decline, you have to be worried about your market share,” Sfakianakis said. The falling crude exports could help explain the decision to lower prices to Asian markets as OPEC’s largest producer looks to protect its market share in global markets, said Sfakianakis.

Sfakianakis said that Saudi Arabia needs to keep exports at a minimum of 7 MMBOPD in order to pay for its $229 billion 2015 budget. Brent must average $80/bbl this year for the budget to breakeven as well. Midday Brent April contracts were trading at about $60 per barrel.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.