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The world’s top crude oil exporter, Saudi Arabia, will keep supplying at least several refiners in North Asia with full contractual volumes of crude in May, despite the 500,000 bpd Saudi production reduction as part of the latest OPEC+ cuts beginning next month, sources familiar with the plans told Reuters on Monday.
Since several major oil producers in the OPEC+ group announced the surprise cuts at the beginning of April, refining customers in Asia have been anxious to learn whether the reduced production will impact the supply of crude, or if the cuts were just a move to boost oil prices, an unnamed source at one Asian refiner told Reuters.
The biggest OPEC producers in the Middle East and several other members of the OPEC+ pact announced on April 2 a total of of fresh production cuts, on top of Russia extending its own 500,000-bpd cut through the end of the year.
The surprise OPEC+ cuts not only lifted international oil prices but also strengthened the bullish futures structure of the main Middle Eastern benchmarks, off which the major Gulf producers price their crude going to Asia.
The Dubai crude and the Dubai swaps have jumped and narrowed the gap with the price of Brent Crude after the shock OPEC+ announcement. Analysts are not ruling out the possibility that Dubai crude could move into a premium above Brent in the coming months with the Chinese reopening and the expected increase in imports in the world’s largest crude oil importer.
After the cuts were announced, Saudi Aramco raised its official selling prices (OSPs) for its crude going to Asia in May, which could increase the upward momentum for Middle East medium and sour grades.
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.