Saudi signals first cut in crude supplies to Asian customer-refinery source

Evidence mounts that the output reduction has so far failed to rein in a global crude glut in crude.
Evidence mounts that the output reduction has so far failed to rein in a global crude glut in crude.PHOTO: REUTERS

TOKYO (REUTERS) - Saudi Arabia, the world's biggest oil exporter, has notified at least one Asian refiner of its first cut in crude allocations since an Opec output cut took effect in January, a source told Reuters on Wednesday (May 10).

After talks, the buyer avoided a cut in June because of an earlier request for extra supplies, the source said.

Still, the notification of cuts in June allocations signals added urgency among Opec members as evidence mounts that the output reduction has so far failed to rein in a global crude glut in crude.

Opec has previously kept supplies to clients in high-growth Asian markets steady, while cutting allocations to Europe and the United States.

Reuters reported on Tuesday (May 9) that state-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June, as it keeps to the production agreement and trims exports to meet rising domestic demand for power during the summer.

Seven million barrels is roughly two days of oil imports into Japan, the world's fourth-biggest importer.

Aramco and other producers typically issue monthly notices to refineries and other buyers with contracted supplies outlining their intended allocations to each customer. Usually they keep volumes at previously agreed levels but sometimes will reduce or increase the supplies depending on market conditions.

The Asian refiner had earlier requested higher supplies but nevertheless received a notice alerting it to cuts in its June allocation, the source said. Because of the previous request, Aramco will maintain higher volumes, the source said.

A second Asian refiner has received the contracted volumes for June, steady from the previous month, a separate industry source said.