Saudi Arabia is once again China's top oil exporter - but the reason is bad news

Oil exporters are continuing to fight over China.

The latest trade data from China published last week showed that crude-oil imports in January stood at 6.3 million barrels a day.

That's 305,000 barrels a day lower year-over-year, making it the first yearly decline since May, according to Barclays analyst Feifei Li.

Notably, Russia had the biggest monthly drop in exports to China after overtaking Saudi Arabia in December as the biggest crude exporter to China.

Russia exported 796,000 barrels a day to China in the first month of 2016, down 341,000 month-over-month.

Barclays' Li suggested that this slowdown could have to do with China's teapot refineries, which are small, private oil refineries in China that have been buying up crude oil with the intention of exporting the final product. Li wrote (emphasis ours):

Russia ESPO blend has been popular among Chinese teapot refineries, which received crude import quotas and started importing crude oil last year. However, according to [research firm] Argus, teapot refineries are facing credit constraints from banks. At least two ESPO cargos were defaulted by Chinese teapot refineries due to credit issues.

And so while the broader story would seem to focus on the fortunes of major exporters like Saudi Arabia and Russia fighting over market share in China, it's clear that oil buyers in the world's second-largest economy are dealing with their own issues that don't paint a pretty picture of the situation there.

In January, China's imports from Saudi Arabia were virtually unchanged at 1 million barrels a day against 1.1 million in the month prior. So thanks to the lower total imports, the Saudis' market share increased to 15.9%, its highest level since June.

Russia and Saudi Arabia have been vying for market share in China for some time now. Russia seemed to have the upper hand last month, with RBC Capital Markets' Michael Tran saying this was a big deal as the Saudis had lost the top spot just six times in the past five years.

Moreover, Tran added, the Saudis increased exports to China by only about 120,000 barrels a day over the past five years - a growth rate that was beaten by several countries including South Sudan and Colombia.

Interestingly, part of Russia's success in China in 2015 had been attributed to its willingness to accept Chinese yuan denominated currency for its oil.

(And not, as others have suggested, because of any sort of allegiance to the Chinese-Russian friendship.)

The Saudis, however, had a few of their own market-share-capturing tricks.

"Owning refineries in key demand regions guarantees market captivity," Tran previously wrote. "This has historically been part of the Saudi playbook and the recent reported interest in acquiring stakes in Chinese refineries is a strategic move that would guarantee the Kingdom a seat at the table in the preeminent region for demand growth."

But in any case, the big takeaway from China's latest trade data, Li argues, "showed major crude oil exporters continue to fight for market share in China," even as the situation there appears unsteady.