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The biggest oil importers in Asia have been busy buying June-loading spot crude cargoes from the Middle East since top OPEC+ producers announced additional cuts beginning in May and after Saudi Arabia hiked again the price of its term cargoes going to Asia.
Customers from China, Japan, and Thailand have been snapping spot cargoes from Middle Eastern producers such as the United Arab Emirates (UAE) and Qatar, traders told Bloomberg on Thursday.
The higher demand for spot Middle Eastern supply has pushed up the regional Dubai benchmark, according to the traders.
Russia’s crude is also a favorite with some Asian refiners, with spot offers for the ESPO grade also on the rise, the traders told Bloomberg.
The biggest OPEC producers in the Middle East and several other members of the OPEC+ pact announced early this month a total of 1.16 million bpd of fresh production cuts. Saudi Arabia, OPEC’s de facto leader and top global crude exporter, will cut 500,000 bpd and said that the move was “a precautionary measure aimed at supporting the stability of the oil market.”
The voluntary production reductions include big cuts, beginning in May and lasting through the end of 2023, from the top Middle Eastern producers who typically export sour and more heaver varieties of crude.
Saudi Arabia has signaled that it will keep supplying at least several refiners in North Asia with full contractual volumes of crude in May despite the Saudi production reduction.
Saudi Arabia, however, supplies its crude under long-term contracts.
After the latest cuts were announced, Saudi oil giant Aramco also raised its official selling prices (OSPs) for its crude going to Asia in May. The higher prices could increase the upward momentum for Middle East medium and sour grades while the cuts tighten the market for those grades just as demand in Asia is set to rebound.
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.