Saudi signals first cut in crude oil supplies to Asia

Saudi Arabia, the world’s biggest oil exporter, has notified at least two Asian refiners of its first cuts in crude allocations for regional buyers since an OPEC output reduction took effect in January, two refining sources told Reuters on Wednesday.

State-owned Saudi Aramco has told Asian buyers it is curtailing supplies for June to meet its commitments for the output cut, one of the sources at a refiner in South Korea said.

“Saudi is adjusting supplies because it has somewhat supplied full volumes or even more in the previous months,” the source said, declining to give specific details on the cuts.

The notification of the reductions in June allocations signals added urgency among members of the Organization of the Petroleum Exporting Countries as evidence mounts that the output cut has so far failed to rein in a global glut in crude.

OPEC has previously kept supplies to clients in high-growth Asian markets steady, while cutting allocations to Europe and the United States.

Reuters reported on Tuesday that state-owned Saudi Aramco will reduce oil supplies to Asian customers by about seven million barrels in June, as it keeps to the production agreement and trims exports to meet rising domestic demand for power during the summer.

Seven million barrels is roughly two days of oil imports into Japan, the world’s fourth-biggest importer.

Aramco and other producers typically issue monthly notices to refineries and other buyers with contracted supplies outlining their intended allocations to each customer. Usually they keep volumes at previously agreed levels but sometimes will reduce or increase the supplies depending on market conditions.

The second refining source that received a notice of a cut had earlier requested that Aramco provide higher supplies than it was allocated but was told instead it would be cut. After discussions with Aramco, the company will keep its volumes unchanged in June, the source said.

A third Asian refiner is getting contracted volumes for June, steady from the previous month, a separate industry source said.

A fourth refiner said it had not received any notifications by Wednesday.