Reuters
Saudi Arabia, the world’s largest oil exporter, has notified some refiners in Asia that it will supply full contractual volumes of crude in May, three sources with direct knowledge of the matter said on Friday.
This comes after the Organization of the Petroleum Exporting Countries and allies including Russia agreed to reduce production by 9.7 million barrels per day (bpd) in May and June after oil prices hit 18-year lows. The cuts are aimed at easing a supply glut exacerbated by a collapse in global oil demand following the coronavirus outbreak.
Although there is no change in the volume of oil supplied, state oil giant Saudi Aramco has altered the ratio among its crude grades by increasing Arab Light quantities and reducing those of Arab Heavy, the sources said.
The company could not be reached immediately for comment.
Saudi Arabia is expected 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’ deal.
Despite the cuts, Saudi Aramco has made deep price reductions for crude it sells to Asia in May after fuel demand and complex refining margins in Singapore DUB-REF-SIN slumped.
The price gap for Arab Light and Arab Heavy is at its narrowest ever at 10 cents a barrel, traders said, reflecting poor demand for light grades, which yield more gasoline and naphtha, products that have been badly hit by government measures to fight the virus outbreak.
The narrow price difference may encourage some refiners to process more light crude, one of the sources said.