Several buyers in Asia are looking to buy spot oil cargoes from Russia, Africa, Brazil, or the United States after the world’s top crude exporter, Saudi Arabia, unexpectedly raised its official selling prices for its crude going to Asia in July.
At least three refiners in Asia are looking to nominate lower volumes of Saudi crude for next month – as per the contract allowance – and boost purchases from outside Saudi Arabia, including cheaper spot cargoes from Russia, sources with knowledge of the refiners’ buying strategies told Bloomberg on Tuesday.
On Sunday, the OPEC+ producers decided to keep the current cuts until the end of 2024, while OPEC’s top producer, Saudi Arabia, said it would voluntarily reduce its production by 1 million bpd in July, to around 9 million bpd.
On the following day, Saudi Arabia raised the official selling price (OSP) for its flagship grade Arab Light for Asia by $0.45 per barrel to a premium of $3.00 over the Oman/Dubai average, off which Middle East crude for Asia is priced.
The price hike from Saudi Arabia surprised the market, which before the Saudi production cut had expected lower prices in a Reuters poll.
Saudi Arabia, however, seems to be looking to boost revenues by offering lower volumes in July but at higher prices.
So, some Asian refiners are on the prowl for cheaper cargoes, although spot supply for July may not be readily available as the typical trading cycle for next month’s loadings has expired, traders told Bloomberg.
Some Chinese refiners sent their nominations for July before the announcement of the Saudi cut, so they may not be able to change those.
One large buyer that is not particularly concerned with more expensive Saudi crude is India. The world’s third-largest crude oil importer has reduced purchases of crude from the Middle East in recent months, as cheaper Russian spot barrels are making their way to Indian refiners.
India is estimated to have imported record volumes of Russian crude in May, more than its combined imports from the next four largest suppliers - Iraq, Saudi Arabia, the United Arab Emirates (UAE), and the U.S.
By Tsvetana Paraskova for Oilprice.com
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