Compared to the first six months of 2013, the value of Colombian oil exports to China rose 61% and 262% to Mexico amid a global slowdown in crude prices and decreased oil demand in the US.
With the US shale gas revolution in full swing, the country’s energy production is at its highest level in nearly 30 years and domestic oil supplies more than doubled what analysts predicted. This massive shift towards self-reliance in the world’s largest market for oil exports has put intense pressure on the price of crude, down 25% since June to around $80 per barrel, and has forced suppliers to look for alternative markets.
Colombian oil producers are doing just that. Traditionally, the US has been their largest and most important crude export market, and it still is in absolute terms. But decreasing demand has caused them to look to transfer exports to China, the world’s second largest oil importer, and Mexico, where production has slowed from policy changes.
Comparing the first six months of this year to the last, oil exports to China increased 61% and 262% to Mexico, while falling 35% to the US. However, though the growth in Mexican exports is huge, the total value going there is still only slightly above 2% of that going to China. China’s Colombian crude imports increased from 2.6 billion to 4.3 billion USD.
Changes in Colombian oil destinations
2014 oil exports by country
Part of the reason Chinese companies are importing more Colombian crude is price – due to the country’s heavier crude type making it more complex to process, the price per barrel sells at a discount. According to data compiled by Bloomberg, the cost of Chinese oil imports are $94.56 per barrel from Colombia, $95.27 from Brazil and $102.30 from Saudi Arabia.
Moreover, Chinese companies are beginning to integrate more refining capabilities of heavy crude into their plants, making Colombian oil well positioned for delivery over the long run.
However, with Saudi exporters offering significant price discounts even as market rates fall, it is unclear how long Colombia’s price advantage will last.