State oil giant Saudi Aramco will supply full crude contract volumes loading in May to several North Asian buyers despite its pledge to cut output by 500,000 barrels per day, several sources with knowledge of the matter said on Monday.
This comes after OPEC+ surprised markets last week by announcing an extra output cut of 1.16 million barrels per day (bpd) from May for the rest of the year.
Saudi Aramco’s monthly allocation was being keenly watched by investors as an indicator of whether planned output cuts could tighten supplies in Asia, the world’s biggest crude import market.
People are wondering whether the additional voluntary cut will actually affect supply, or whether it is designed just to shore up oil prices, said a source at an Asian refiner who declined to be named as he is not authorised to speak to media.
The OPEC+ announcement caused Brent and US West Texas Intermediate crude futures, to jump 6% last week, returning to levels last seen in November.
Last week, Saudi Aramco also surprised the market by raising prices for the flagship Arab Light crude it sells to Asia for a third month in May. It also increased the prices of other oil grades to Asian clients amid expectations of tighter market supply.
Asia’s oil demand had been expected to weaken in the second quarter as several refiners in Asia, namely Sinopec, South Korea’s third largest refiner and Aramco affiliate S-Oil Corp, Japan’s Fuji Oil and Idemitsu Kosan are shutting a combined 1.15 million bpd of crude distillation capacity in May.
Still, some investors are bullish about a recovery in China’s oil demand and expect global oil markets to tighten in the second half this year and push prices towards $100 a barrel.
Meanwhile, the Abu Dhabi National Oil Company, a state-owned oil giant from the United Arab Emirates, has informed at least three buyers in Asia that it will supply full contractual volumes of crude in June, trade sources said.
The UAE plans to cut 144,000 bpd from May as part of the OPEC+ cuts.
Published in The Express Tribune, April 11th, 2023.