The tight oil market could see some reprieve in the coming two months as refineries plan end-of-summer maintenance, according to Russell Hardy, the chief executive of the world's biggest independent oil trading house, Vitol.
Although supply would improve globally, the sour crude market will remain tight as the production cuts from the Middle Eastern OPEC+ members continue, Hardy said at the Asia Pacific Petroleum Conference (APPEC) by S&P Global Commodity Insights on Monday, as carried by Reuters.
"Because of the OPEC+ cuts, there's not sufficient supply (of sour crude) for all these complex refineries in India, Kuwait, Jizan, Oman and China," Hardy told the conference which is held in Singapore.
Sour crude mostly comes from the Middle Eastern oil-producing nations, which are currently cutting supply to the market.
"There are too many customers and not enough material to go around," Vitol's Hardy said.
The market for sour crude, especially in Asia, has tightened as Kuwait is ramping up a large new refinery and cutting exports to divert supply to its new facility, adding to the ongoing cuts from major Middle Eastern producers in the OPEC+ group to further restrict heavy and medium sour crude supply.
With lower sour crude supply from Kuwait, Asian refiners are scrambling to get their hands on additional sour crude volumes. But Saudi Arabia and Iraq, key sour crude producers, are also cutting production, making the sour crude market one of the hottest in the oil complex this year and undermining Asian refiners' profitability.
The price volatility in the oil market has come mostly from the product side, not from crude, due to very tight refining capacity, Vitol's Hardy said at the conference. For almost a year, Brent Crude prices have been holding "pretty stable" in the $72-$88 a barrel range, he added.
In Asian trade early on Monday, Brent was slightly down at $88.43 per barrel.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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