Saudi Arabia has informed its clients that their crude oil deliveries in January will be lower, to reflect the country’s compliance with the production cut agreed on by OPEC members last week, according to a note issued by PIRA Energy Group.
The note also included information that the biggest cut in deliveries will be to the United States, as margins were lower there. The U.S. needs Saudi Arabian crude or equally heavy grades for its refineries, which require a mix of light and heavy grades to produce fuels and other oil products.
This is an interesting development in light of Saudi Oil Minister Khalid al-Falih’s warning from mid-November that the U.S. should not try to stop imports from the kingdom. Al-Falih was addressing President-elect Donald Trump and his plan to make the country self-sufficient in terms of energy.
At the time, Al-Falih said any such plan would hurt free trade and would not be “healthy” for the energy industry.
Also, earlier this month, Saudi Arabia said it will be raising its crude oil exports to Asia, which already accounts for two-thirds of its crude sales. The information came from unnamed sources from the buyers, and was not officially confirmed by Saudi Aramco, but it is plausible that the kingdom would be doing its best to preserve its market share there.
Asian buyers are already diversifying into non-OPEC sources of crude and the U.S. also has alternatives for heavy crude for its refineries, the closest among them just north of the border. In the current global oil production situation, nobody is irreplaceable, even Saudi crude.
By Irina Slav for Oilprice.com
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