Aramco will ship the full volumes of crude contracted by Asian refiners in a bid to protect its market share in the biggest consuming region in the world ahead of production cuts that come into effect next month.
S&P Global Platts quotes sources from the refining and oil trading sectors in Asia as confirming refiners will not be subjected to supply cuts like the United States. Last week Bloomberg reported Riyadh could reduce crude oil exports to the United States to the lowest in three decades.
What’s more, after cutting its prices considerable, Aramco also supplied additional volumes to refiners and traders in Asia, highlighting its determination to keep the Asian market at all costs, even substantially lower revenues as oil prices remain low.
One trader with a refiner in Northern Asia told S&P Global Platts "I do not think we will take any other type of crude if we can help it. The Saudi OSPs look too attractive this month," a trader with a North Asian refiner said. This means the Saudis have lowered their prices enough to compete with Iranian crude, which is saying something given Iran’s desperate need to keep its oil flowing abroad amid U.S. sanctions.
However, Iran is not the only rival. Another trader told Platts "Despite OPEC cuts, they [Aramco] are properly looking after term customers in the East. [But the] US is a net exporter now. Those barrels have to go somewhere."
The latest data on U.S. oil exports to Asia suggested an average daily rate of 1.1 million barrels. That’s up from an average 627,000 bpd a year earlier, S&P Global Platts reported. To compare, the November 2018 figure is close to the amount Saudi Arabia exports daily to China alone. However, the consistent growth in U.S. production could eventually become a bigger challenge for the Kingdom in the key Asian market.
By Irina Slav for Oilprice.com
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