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Saudi Arabia Cuts Oil Deliveries To U.S.

Oil tanker Middle East

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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Leave a comment
  • Joe on December 09 2016 said:
    Not a problem. Canada is ready to deliver.
  • jman57 on December 09 2016 said:
    The U.S should do everything in its power to eliminate Saudi Arabia as a supplier of oil including using the planned sale of 100 mb of its strategic reserves to offset and reduction in Saudi Arabia imports. If Trump wants to prove his business skill in dealing with unfair trade practices, he should include OPEC and Saudi Arabia as they have declared a trade war in oil with the U.S.
  • petergrt on December 09 2016 said:
    The US should not deal with market manipulating countries - it simply a violation of antitrust laws.

    We should impose a tariff of say $7/PB for crude emanating from any location that is a part of any market controlling agreement.
  • David on December 10 2016 said:
    Saudi worried about free trade, LOL.
  • John Scior on December 10 2016 said:
    One might begin to wonder if the Saudi cuts are in some way related to the congress allowing for passage of law enabling victims of 9/11 to sue Saudi entities. As the Saudi's fight Iranian interests, their goal was to "gain market share" The supposed OPEC agreement will be widely violated and its the Saudi's doing most of the cutting.
    As far as anti-trust laws being violated as previously commented upon, one should note that US laws do not apply in other countries , thus the idea of sovereignty. Selling the stategic petroleum reserve seems futile in light of the worlds reliance upon huge Saudi reserves. I don't see the US being self sufficient in energy anytime soon, not while cheaper energy supplies can be obtained on the world markets.
  • Joe w on December 11 2016 said:
    I say let the big oil price role consider l work for a small independent company here in the u.s. with the low oil prices I lost 25% of income that put a burden on me and my family.

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