Saudi deepens some oil supply cuts
Reuters
First Posted 13:58:00 12/08/2008
Filed Under: Oil & Gas - Upstream activities, Soft Commodities, Economy and Business and Finance
TOKYO, Japan -- Saudi Arabia, the world's top crude exporter, will cut oil supplies to a few of its Asian customers even more deeply next month, but will maintain curbs to most refiners unchanged from December, industry sources said Monday.
News of the mixed monthly allocations show that the kingdom is tightening crude oil supplies a little bit more even ahead of the meeting of the Organization of Petroleum Exporting Countries (OPEC) next week in Algeria, where the group is expected to make a third production cut to shore up tumbling prices.
Oil traders had not expected Saudi Arabia to make any further explicit cuts ahead of that meeting, but on Monday at least two oil refiners in Asia were told by state oil firm Aramco that they would get less crude in January than in December.
"We were cut 10 percent... It was more than expected, we thought it would be around 5.0 percent like last time," a source with a major customer in Japan told Reuters on condition of anonymity because the information isn't public. Refiners measure their cuts versus the volume stipulated in annual contracts.
A second north Asian refiner outside of Japan also said its supplies would be cut by about 7.0 percent, deeper than the 5.0-percent curb that Saudi had given to nearly all its Asian buyers for December after OPEC's 1.5-million barrels per day (bpd) output cut.
Oil prices extended earlier gains to more than $2.00 a barrel after news of the Saudi curbs. By 0517 GMT, US crude for January delivery was up $1.79 to $42.60 a barrel, lifted from its lowest close in two years by a bounce in equity markets.
Another three refiners in Japan and South Korea said their cuts would remain at 5.0 percent below full volumes.
Saudi Arabia normally cuts all its Asian customers by a similar quantity to avoid the appearance of favoritism.
But some refiners have said that demand is so poor -- and export margins so weak -- that they would welcome receiving less Saudi oil. Some have said they requested lower shipments, although normally most Asian refiners nominate full volumes.
One industry source with a refiner outside of Japan said their supply of medium and heavy crude was reduced in January versus the norm, but their overall volumes were almost the same as their contract thanks to higher light crude sales.
Traders added that there had been no changes to operational tolerance for January. Kuwait told its customers last week that it would eliminate an option to load each tanker with 5.0 percent more oil than allocated under contracts from Dec. 20.
OPEC last month delayed a decision on a new oil supply cut until mid-December in order to give two previous cuts totaling two million bpd more time to work.
The group meets on Dec. 17 in Algeria in an effort to halt the slide in oil prices, which last week fell to a four-year low of nearly $40 a barrel, over $105 off their July record high.
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