Saudi Arabia, the world’s biggest oil exporter, has notified some refiners in Asia that it’ll supply full volumes of crude in May, three sources with direct information of the matter stated Friday.
This comes after the Organization of the Petroleum Exporting Nations and allies together with Russia agreed to cut back production by 9.7 million barrels per day (BPD) in May and June after oil prices hit 18-year lows. The cuts are aimed toward easing a supply glut exacerbated by a plunge in global oil demand following the coronavirus pandemic.
Although there is no change within the quantity of oil supplied, state oil titan Saudi Aramco has modifid the ratio among its crude grades by increasing Arab Light portions and reducing those of Arab Heavy, the sources stated.
Saudi Arabia is anticipated to cut its production by 2.5 million BPD in May and June, from a baseline of 11 million BPD, under the terms of the producers’ accord.
Despite the reductions, Saudi Aramco has made deep price reductions for crude it sells to Asia in May after gas demand and complex refining margins in Singapore plunged.
The price difference for Arab Light and Arab Heavy is at its narrowest ever at 10 cents per barrel, traders stated, reflecting poor demand for light grades, which yield more gasoline and naphtha, products that have been badly impacted by authorities measures to fight the virus outbreak.
The slender price difference may encourage some refiners to process extra light crude, one of the sources stated.