Saudi Arabia will supply full contracted volumes to several North Asian clients next month despite extended cuts, Reuters has reported, citing unnamed sources.
The report follows news that Aramco would cut the price of its flagship Arab Light crude for Asian buyers but by only half of what was expected as a price cut. This, Reuters reported, led some refiners from China to ask for lower volumes for loading in January.
Not all oil importers from Saudi Arabia can afford to do that, however, per one source with a Japanese refiner.
“I believe many have the thoughts to reduce the supply volumes. But it’s not easy for us to do that. We need to maintain good relations with Saudi due to energy security concern,” the source told Reuters.
Last week, Aramco reduced the price for Arab Light for Asian buyers for the first time in seven months, by $0.50 per barrel. Expectations had been for a twice deeper price cut.
“Saudi set the price too high. That could prompt some buyers to nominate less cargoes and turn to buy cheaper crude from other suppliers from the spot market,” a refinery executive from Asia told Reuters at the time.
Some 40 million barrels of Saudi crude oil have been contracted by Chinese refiners for loading in January, the Reuters sources said. This would be down from 46 million barrels this month.
Saudi Arabia recently agreed with its partners in OPEC+ to extend production cuts of 1 million barrels daily over the first quarter of next year. To these, other members will add their own, albeit much more modest output reductions for a total supply cut of 2.2 million barrels daily.
The oil market has remained unimpressed by the move, with reports about record U.S. production sparking fears of oversupply and weighing on prices.
By Charles Kennedy for Oilprice.com