Aramco To Supply Full Crude Volumes To Asian Refiners Despite Production Cut

Saudi Aramco, the world’s largest crude oil exporter, has assured at least five North Asian refiners they would get the full crude volumes they had asked for in July, even after the production cut Saudi Arabia announced last week, sources familiar with the plans told Reuters on Monday.

On June 4, the OPEC+ producers decided to keep the current cuts until the end of 2024, while OPEC’s top producer, Saudi Arabia, said it would voluntarily reduce its production by 1 million bpd in July, to around 9 million bpd. The cut could be extended beyond July, Saudi Energy Minister Prince Abdulaziz bin Salman said.  

On the following day, Saudi Arabia raised the official selling price (OSP) for its flagship grade Arab Light for Asia by $0.45 per barrel to a premium of $3.00 over the Oman/Dubai average, off which Middle East crude for Asia is priced.

The price hike from Saudi Arabia surprised the market, which before the Saudi production cut had expected lower prices in a Reuters poll.

At least five North Asian customers will receive all the volumes they have asked for, according to Reuters’ sources.

But other refiners in are said to be looking to buy spot crude oil cargoes from Russia, Africa, Brazil, or the United States after Saudi Arabia unexpectedly raised its official selling prices for its crude going to Asia in July.   

At least three refiners in Asia are looking to nominate lower volumes of Saudi crude for next month – as per the contract allowance – and boost purchases from outside Saudi Arabia, including cheaper spot cargoes from Russia, sources with knowledge of the refiners’ buying strategies told Bloomberg last week.

Yet, spot supply for July may not be readily available as the typical trading cycle for next month’s loadings has expired, traders told Bloomberg. Some Chinese refiners sent their nominations for July before the announcement of the Saudi cut, so they may not be able to change those.