Saudi Arabia keeps Asia supply steady in July

Tokyo/Singapore: Saudi Arabia, the world's top oil exporter, will supply full contracted term volumes to Asia for July, but did not offer any extra as refineries showed little appetite for fuel oil-rich grades.

Saudi Arabia will also keep July crude supplies to Europe steady from June, a trade source at a European company said yesterday.

Asian refiners said they did not see the need for extra Saudi crude, seeming to support the view of the Organisation of Petroleum Exporting Countries (Opec) that the world, and especially this region, has enough supplies, at least of heavy grades.

"We did not ask for additional crude, but they did not approach us with extra either. Nobody wants additional crude in Asia now, especially not the heavy type as the margins are not so good," a trader with a North Asian refiner said.

Saudi Arabia is the only Opec - supplier of more than a third of the world's oil - with capacity to boost output quickly and significantly.

It would become clearer later in the day whether or not Saudi Aramco increased July crude allocations to the US.

The market is looking for signs of rising Saudi crude exports after the kingdom said last month it was boosting oil production by 300,000 barrels per day (bpd) to help compensate for lower output from other producers as oil prices rose above $130.

Refining margins for Middle East benchmark Dubai - similar to Saudi flagship Arab Light crude - run in a complex plant in Singapore, have averaged a healthy $8 a barrel profit since the start of May, data show, boosted by record gas oil prices.

But margins on the same crude run in a simple refinery - of which there are still many in China, India and Southeast Asia - have slid to their lowest in over a decade, dragged down by struggling fuel oil. They were around minus $4.20 a barrel yesterday.

Most Saudi crude is fuel oil-rich, making extra volumes less attractive to many in Asia, which already buys slightly more than half of total Saudi crude exports.

Ten Asian refiners confirmed they had received full term volumes. Several sources said they had not been offered additional, and nine confirmed they did not seek extra crude.

Officials at the three Indian state-run refiners said they received full volumes as per their term contracts.

They neither asked, nor were offered, additional volumes of Saudi crude for July, they added.