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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Saudis Cut Back Oil Supply To Asia, Slash Exports To U.S.

Trump Bin Salman

OPEC’s de facto leader and the world’s biggest crude oil exporter, Saudi Arabia, will be reducing exports to some of its buyers in Asia next month, and will significantly cut crude exports to the U.S., Reuters reported on Monday, quoting industry sources.

Cuts in exports to Asia in July would be a bit steeper than the volumes cut in June, according to Reuters’ sources.

Saudi Arabia is reducing its oil exports to Asia by around 7 million barrels this month, with Saudi Aramco set to cut its crude supplies to China, South Korea, and South East Asia by 1 million barrels each. In addition, Saudi exports to Indian buyers in June were set to decline by just over 3 million barrels, and supplies to Japan – to drop by just below 1 million barrels.

For July, at least five Asian buyers--mostly in North Asia--would get full contracted volumes, while some customers in India, China, and South Korea would see lower volumes of supplies, according to Reuters’ sources.

Saudi Aramco is set to cut July exports to India by nearly 200,000 bpd, and to China by around 110,000 bpd, while buyers in Japan and Taiwan will get their full volumes, one source with knowledge of allocations told Reuters. One of the main Chinese buyers has asked for lower volumes next month, due to refinery maintenance and the more expensive Dubai crude benchmark.

Outside Asia, the Saudis will cut exports to the U.S. by around 35 percent next month, one source told Reuters.

Just a day after OPEC extended the output cuts into March 2018, Saudi Oil Minister Khalid Al-Falih said that the Kingdom planned to purposely reduce exports to America to force a reduction in the sizeable U.S. inventories, which are preventing a greater rise in global oil prices. Related: Expert Analysis: Bullish Sentiment Is Fading Fast

“Exports to the U.S. will drop measurably,” Al-Falih said at the end of May.

Elsewhere, Saudi Arabia is keeping its crude exports to Europe steady in July over June.

While the Saudis have over-complied with OPEC’s production cuts since the beginning of the deal in January, they have not drastically cut exports to the Asian market, where the battle for market share is going on, cuts or no cuts.

Now summer is coming, and Saudi Arabia, which typically burns around 700,000 bpd of oil for power generation between May and August, could further reduce exports.

This summer, however, Saudi Arabia wants to use more natural gas in power plants to cut the use of oil, which could lead to reducing oil consumption for power generation by around 200,000 bpd, industry sources told Reuters last month.

By Tsvetana Paraskova for Oilprice.com

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  • Vegas Vinnie on June 12 2017 said:
    What a joke!! For those not astute enough to recognize what the Saudi's are doing, recognize this. The U.S. oil market is one of the most (if not THE most) transparent markets upon the face of the Earth. The Saudi "shell-game/3-card-monte" is simple. Give the impression of drastic "cuts" by way of reducing exports to the U.S. and the U.S. EIA will report MASSIVE "shortages of oil insufficient to meet demand". The price will (un)necessarily go up giving the false impression demand is eclipsing supply and the market will soon "come into equilibrium/balance". Many will fall for this narrative and be subjectively punished when the ripple passes and the price of the underlying commodity (in this case crude oil) settles FAR below the current price as the "market" comes to realize it's once again been "had" by Saudi/OPEC. Bravo Saudi, you've figured out yet another manner by which to extend your narrative while failing once again to provide demonstrable/substantive change. Libya, Nigeria, U.S. shale, Russia (read between the lines of the latest narrative), un-friended Quatar, Iran, Iraq, etc. etc.....need I say more? What are THEIR production figures looking like? The ONE thing Saudi Arabia nor any other OPEC henchman can manufacture is DEMAND. Demand is simply not there folks...and it's FALLING proportionate to global supply!!
  • Richard Dafnis on June 23 2017 said:
    Maybe US suppliers are drilling for a reason ! And that is to produce enough supply to meet the demand of US ! Once that happens store supply , export and control sales ! Drillers are now selling contracts at controlled prices ! Saudi Arabia is out on exporting to us! Maybe all new players can some what control pricing with profits now at $35 a barrel!!

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