Saudi Aramco To Cut Asian Shipments In June (8th Month); Will Also Cut Arab Light Shipments

[hatrack]

May 14 (Bloomberg) -- Saudi Aramco, the world's largest state oil company, will cut Arab Light crude oil exports to Asia for the first time in at least three months as part of an overall supply reduction to the region.

The Dhahran, Saudi Arabia-based oil producer will lower shipments starting in June, said three refinery officials who received notices and asked not to be identified because of confidentiality agreements. The producer has been reducing Arab Medium and Arab Heavy sales by between 9 percent and 10 percent of total contracted volumes.

Saudi Aramco's supply cuts in the past few months were focused on its Arab Heavy grade that mostly yields fuel oil during processing. Saudi Arabia is lowering exports to comply with 1.7 million-barrel-a-day production cuts agreed last year by the Organization of Petroleum Exporting Countries.

The company has trimmed shipments below contract levels since November. Saudi Aramco lowered exports to Asian refiners in April by an average 9 percent, and the cuts this month and in June are more than the 7 percent reduction in March shipments.

EDIT

http://www.bloomberg.com/apps/news?pid=20601072&sid=amy1xHPUxLao&refer=energy

[pscot]

1. Hmmmmm

Can we take this at face value? Probably not.

[4dsc]

2. Depletion Levels in Ghawar

This should explain why they are decreasing their exports.. But look for this to be a trend that will occur with more and more members of OPEC as they come to realize that oil in the ground is worth more than money in the bank..

http://www.theoildrum.com/node/2470

[Delphinus]

3. Why are they focusing on Asia only? n/t

[4dsc]

4. Asia only??

Could you be a little more specific??

[Delphinus]

5. From the link:

The company has trimmed shipments below contract levels since November. Saudi Aramco lowered exports to Asian refiners in April by an average 9 percent, and the cuts this month and in June are more than the 7 percent reduction in March shipments.

It's the eighth month that Saudi Aramco has reduced exports to Asia.

It seems to me Asia is the only part of the world who is getting its oil cut back. Perhaps I'm not understanding it correctly, though.

[Strelnikov_]

6. Could be because that is where a majority of their oil goes

if memory serves me well.

Also could have something to do with the structure of the contracts with those being supplied.

[happyslug]

7. Probably Asia is more price sensitive to high oil prices

I.e. the US, Japan and Europe will buy oil NO MATTER THE PRICE (or at much higher prices compared to what stops Asians from buying Oil today). Asia, being more price sensitive, will DROP ITS OIL USAGE IF THE PRICE GOES HIGHER AT TODAY'S PRICES. Basically as the price of oil goes up, Asian stop using oil even at $3 a gallon.

[4dsc]

8. You are correct

The Saudi's have quietly been shipping more and more oil to Asia versus the US!!

[pscot]

9. If they reduced exports to America and Europe

by seven to nine percent it would be a huge story in the western press, peak oil would become an red hot topic and panic might ensue. Cuts to asian markets are below the radar. Ghawar is faltering. I think they're trying to keep a lid on it.

[Delphinus]

11. I agree.

Prices here hit $3.39 yesterday and in this morning's paper (and on last night's newscasts), people were saying they were just going to have to live with it. No real talk about cutting back.

[Javaman]

10. Could this have anything to do with Iran signing an oil contract with china?

hmmm, inquiring minds would like to know.