Despite an unexpected OPEC+ oil production cut, State oil giant Saudi Aramco says it will supply full crude contract volumes loading in May to several North Asian buyers, Reuters reported on Monday, citing sources familiar with the matter.
This follows last week’s shock announcement of a further output cut of 1.16 million barrels per day from May for the rest of the year by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+. Reuters estimates that the overall volume of cutbacks by OPEC+, now stands at 3.66 million bpd, or 3.7% of global demand.
Among OPEC+ members, Saudi Arabia has pledged the largest reduction, at 500,000 barrels per day. The cuts are in addition to those announced in October.
Saudi Aramco also shocked the market by increasing the price of its trademark Arab Light oil sold in Asia for a third consecutive month in May. In addition, it hiked rates for other grades of oil sold to Asian customers on the likelihood of supply constraints.
Since several Asian refiners, including Sinopec, South Korea’s third largest refiner and Aramco affiliate S-Oil Corp, Japan’s Fuji Oil, and Idemitsu Kosan, will be shutting a combined 1.15 million bpd of crude distillation capacity in May, the region’s oil demand was expected to weaken in the second quarter.
Despite this, some investors are optimistic about a rebound in China’s oil demand, anticipating that tightening global oil markets in the second half of the year will drive prices towards $100 per barrel.