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Saudi Arabia stood by its pledge to curtail oil output under the OPEC+ deal, reducing shipments to the prized Asian market.
Saudi Aramco cut contractual volumes for June loading to at least seven Asian customers, according to traders notified by the state-owned company. Three other regional buyers received what they asked for. Aramco didn’t immediately respond to an email seeking comment outside regular working hours.
The reductions were expected as the world’s largest oil exporter announced a few days ago that it would cut production by a further 1 million barrels a day on top of what it had already committed to under the OPEC+ agreement. It also followed a move by fellow OPEC member Iraq to curb supplies to Asia.
The cuts in supply to the world’s biggest oil market are a sign OPEC is adhering strictly to its agreement to curb production, which took effect May 1, in an attempt to offset the demand hit from the coronavirus. The curbs are likely to support premiums in the spot market for July-loading cargoes.
Three of the seven refiners that had their term supplies cut said the reductions were substantial, with a curtailment of 20% or more.
Aramco’s allocation announcement came later than usual this month following a delay in releasing its official selling prices. The price increase to Asian buyers earlier this month took many of them by surprise.
The reduction in supplies of oil in Asia coincides with an improvement in demand as the Chinese economy powers up and consumption in India looks to be on the mend. Russian Sokol and Iraqi Basrah crudes have already started trading at higher differentials, according to three traders who buy and sell those grades in the region.
