Saudi Arabia will reportedly reduce its oil shipments to China.

The action is being taken as China imports more cheap Russian oil.

According to sources with knowledge of the situation, Reuters and Bloomberg reported on Friday that Saudi Arabia will stop shipping oil to China in July.

The sources state that Saudi Aramco, the world's largest oil producer, has informed at least four Chinese refiners that it will be supplying less oil than the agreed-upon volumes next month.

According to sources, the action is being taken because China is expanding its imports of Russian oil at a significant discount that Moscow gave to purchasers after Western states started canceling Russian supply owing to the sanctions related to Ukraine. In addition, as Russian energy is phased out and new supplies are sought for, there is an increase in demand for Saudi oil globally, particularly in Europe.

According to reports, refineries in Thailand, India, Japan, South Korea, and other countries will receive all of the oil they ordered, and some will even get extra supplies, including a refinery in Pengerang, Malaysia. Additionally, according to reports, the Saudi business has delivered the full contractual volumes to at least three European refiners for delivery in July.

Saudi Aramco shocked the market earlier this week by increasing the official July price for its flagship Arab light oil by $2.10 per barrel for Asia from the amount in June. The action increased already high oil prices to almost $120 per barrel, fueling concerns about supply shortages as consumption peaks throughout the summer in the Northern Hemisphere, Covid-19 lockdowns loosen in China, and sanctions cast doubt on Russian supplies.

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