Tokyo: Saudi Arabia, the world's top oil exporter, will supply full contracted volumes of crude in August to East Asia, steady to July, as refiners continue to shun extra barrels, sources with seven refiners said on Friday.
The market has been looking for signs of where incremental volumes are headed since the oil kingdom pledged to boost production by 550,000 barrels per day (bpd) from May to July to 9.7 million bpd, its highest in more than 30 years.
But little appears to have come to East Asia as refining margins in the region continued to deteriorate.
Allocation
"We got the full allocation as we requested. Saudi Aramco did not ask us to lift more than that," a trader with a lifter said.
Margins at simple refineries, of which there are still many in China, India and Southeast Asia, slumped further this month, with Dubai crude run in a primary unit in Singapore fetching an average discount of $3.20 a barrel over the past two weeks.
Demand for Middle Eastern oil, including most Saudi crudes, is especially hit by falling refining margins, as they are largely medium or heavy sour grades, with a high yield of low-quality fuel oil that is in low demand.
Qatar Oil Minister Abdullah Al Attiyah said yesterday that he saw no demand for the additional crude that Saudi Arabia has pledged over the past few months to pump.
"Even though Saudi Arabia increased production, we are seeing that the demand is not there," the minister said.
"Saudi Arabia tried to offer extra cargoes but the refiners are full to capacity, we see they have high stocks," he said.
Sources with two Japanese lifters said they did not request additional volumes on top of their contracts, nor were offered extra supplies from state-owned Saudi Aramco. "We got it fully contracted, the same as July," a source with a Japanese lifter said.
So far in Asia, only India's giant private refiner Reliance Industries has taken additional Saudi crude, buying 30 per cent of the extra barrels pumped in June and July.
It was not yet clear whether Reliance would also lift additional volumes for August.
Reliance runs the 660,000 barrels per day (bpd) refinery in Jamnagar and its subsidiary Reliance Petroleum is expected to commission a 580,000-bpd plant at the same location later this year, making it the world's biggest refining complex. Asian customers have been receiving mostly full contracted volumes since last November.
Saudi Arabia is the only member of the Organisation of the Petroleum Exporting Countries (Opec) - supplier of more than a third of the world's oil - with capacity to boost output quickly and significantly.
Opec is pumping more than enough oil to world markets now, but will review the supply-demand balance at its next meeting in September, the group's secretary general Abdullah Al Badri said on Thursday.
Opec has repeatedly declined calls from consumers for more output, even as oil rose to a record above $145 last week, saying high prices have nothing to do with a shortage of supply.
Oil has jumped more than 45 per cent this year on supply struggling to keep pace with rising consumption in emerging countries, rising cash flows from investors seeking to hedge against inflation, the weak dollar and fears over Iran.
