Saudi Aramco; the world’s largest oil exporter, reduced the volume of July-loading crude that it will supply to at least five buyers in Asia; seven sources said on Monday.
The cuts were mainly for medium and heavy grades and were seen at refineries in countries such as China; the sources with knowledge of the matter said, Reuters reported.
Four of the refiners saw smaller July cuts than what they had received in June.
The move followed a deal struck by the Organization of the Petroleum Exporting Countries (OPEC) and its allies; including Russia to keep production cuts of 9.7 million bpd, or 10% of pre-coronavirus world demand. This is until the end of July.
Saudi Arabia said it will end its deeper, voluntary cuts amid signs of recovering global demand.
Saudi Aramco declined to comment.
Tighter Middle East supplies and improving refinery appetite for crude have prompted Saudi Aramco to hike July official selling prices (OSPs) to Asia more than expected even though refining margins and oil demand have yet to catch up with the rising crude valuation, the sources said.
“Increased OSPs caught us by surprise and these are not attractive to refiners specially in a market where refining margins are weak,” said BPCL’s head of refineries R Ramachandran.
This has led at least one major Asian buyer to request for almost a third less of its contract volume for July; one of the sources with direct knowledge of the matter said.
According to Reuters; two other sources said they will increase the purchase of cross-region arbitrage cargoes this month, such as West African crude.