Saudi Arabia’s oil giant Aramco has told at least five refiners in North Asia that it would supply the full crude oil volumes by contract next month, Reuters reported on Monday, quoting sources familiar with the plans.
Aramco, the world’s top crude oil exporter, will ship the full volumes North Asian refiners have asked for under their term contracts despite the extended production cut.
Last week, Saudi Arabia said it would extend its 1 million barrels per day (bpd) cut through December. The move reinforces “the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets,” the Kingdom says.
A day later, the Kingdom announced yet another increase in its official selling prices (OSPs) for its crude going to Asia in October. The price of Saudi Arabia’s flagship crude grade, Arab Light, was raised by $0.10 cents per barrel to $3.60 a barrel over the Oman/Dubai average, the Middle Eastern benchmark, off which grades going to Asia are being priced.
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Yet, the price increase was much smaller than an expected hike of $0.45 per barrel in a Reuters survey of five refining sources.
The extension of the Saudi production cut, and Russia’s pledge to also extend its 300,000-bpd export reduction until the end of this year, have pushed Brent oil prices above $90 per barrel for the first time this year.
The market hasn’t seen the full impact of Saudi Arabia’s extra production cut, which could lead to a drastically tighter market if the world’s top crude oil exporter keeps export levels low, according to Vortexa.
Saudi Arabia could be able to single-handedly tighten the market in the fourth quarter, even without the help of other OPEC+ producers, if it keeps export levels as low as it did in August, David Wech, Chief Economist at Vortexa, wrote in a note last week.
By Tsvetana Paraskova for Oilprice.com