Saudi Arabia's oil giant Aramco has slashed by up to 30 percent its crude oil allocations to at least three buyers in Asia for June, compared to what customers had nominated, sources at refineries told Reuters on Thursday.
The move by OPEC's largest producer and the world's top exporter signals that Saudi Arabia is trying to tighten the market in Asia, where demand has started to pick up after lockdowns were eased. Last week, Saudi Aramco raised the price for all its crude oil grades to all regions for June in a move that analysts see as the start of demand recovery.
Earlier this week, Iraq, OPEC's second-biggest producer and the least compliant member in all previous rounds of cuts, was said to have told some of its Asian oil buyers that it would not send the full contractual volumes requested for June. This could be a sign that even OPEC's least compliant member is trying to play its part this time, as oil prices are so low that they are devastating Iraq's primary budget income, oil revenues.
The market sentiment among some refiners in Asia feels like "panic buying" amid what is perceived as a tightening market, one source at a refinery told Reuters today.
Sellers of Middle East crude oil cargoes are offering the crude at high premiums against benchmarks, but refiners haven't bought oil at the higher premiums because refinery margins continue to be poor, Reuters' sources said.
Saudi Arabia and its key allies in the Gulf have been trying to talk up the oil market over the past few days, promising additional cuts on top of their pledges under the OPEC+ deal in effect from May 1.
Earlier this week, Saudi Arabia said it would cut oil production by an additional 1 million barrels per day (bpd) in June on top of its promised cuts as part of the agreement. The United Arab Emirates (UAE) also pledged to cut even more oil production next month, and so did Kuwait.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More