Saudi Aramco has already found buyers for its additional output in July
Saudi sells more light crude to Asia, piles pressure on rivals
SINGAPORE, June 30, 2016
Saudi Arabia will supply more Arab Extra Light crude to at least two buyers in Asia in July, four sources familiar with the matter said on Thursday, as the top oil exporter ramps up shipments in a bid to claim a bigger share of the Asian market.
Saudi Arabia has traditionally accounted for most of the crude imports by Asia, the world's biggest oil consuming region, but recently its position has been challenged with Russia overtaking it as China's top supplier in the past three months.
The kingdom, however, has responded by pumping and shipping more following an oilfield expansion, a move that traders say could pressure rival producers - such as the United Arab Emirates (UAE) and Russia - and knock down prices in Asia.
In fact, state oil giant Saudi Aramco has already found buyers for its additional output in July, with some customers in Asia lifting 10 percent more than contracted volumes, the sources told Reuters on Thursday.
The Opec kingpin kept the official selling price (OSP) for Arab Extra Light unchanged in July, contrary to expectations for a hike, to accommodate a 33 percent rise in output from an expansion at the Shaybah oilfield.
"They are really pushing hard," a trader with a North Asian refiner said.
Saudi Arabia could next cut OSPs for August to retain its competitive edge over rivals during what is expected to be a season for weak demand in Asia as several refineries shut for maintenance in the third quarter.
Already, a near doubling of Asia's crude benchmark Dubai from the first quarter has depressed Asian refining margins. The resultant low demand has hit values for rival light grades like UAE's Murban and Russian ESPO.
"UAE would be most affected if Saudi boosted sales," a second Asian crude buyer said.
Murban - cargoes loading in August sold at discounts against their OSP, while ESPO premiums were mostly below $2 a barrel against Dubai quotes, the lowest in at least eight months.
"China used to be the biggest buyer (of ESPO crude) but they have slowed down a lot," a Singapore-based trader said. --Reuters
