Saudi Aramco, the world’s largest oil exporter, has cut the volume of crude it will supply to at least three buyers in Asia by 10%-30% for June, three sources with knowledge of the matter said on Thursday.
The cuts were made against volumes that the buyers had nominated for June-loading supplies, the refining sources told Reuters.
Saudi Aramco declined to comment.
The move came after Saudi Arabia announced it would voluntarily deepen oil output cuts by additional 1 million barrels per day (bpd) from June to an output level of 7.492 million bpd, the lowest in almost two decades.
The announcement followed a deal struck by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia to cut output by an unprecedented 9.7 million bpd in May and June to reduce excess supply and support prices.
Market sentiment regarding the tightening of Aramco’s crude supplies propped up Asia’s spot market for Middle East sour crude on Thursday as some sellers doubled or even quadrupled their offers from the last trade levels.
Several buyers were looking for Middle East crude cargoes, but sellers were either holding out or offering their cargoes at high premiums, trade sources said.
Last month, the market had been flooded with cheap oil in deep discounts.
“Market sentiment is different now,” said one of the refinery sources.
On Thursday, Exxon Mobil Corp hiked its offer price for Abu Dhabi’s medium sour grade Upper Zakum crude, for July loading, to a spot premium $1.40 a barrel to the grade’s official selling price (OSP), traders said.
This was up from a premium of 30 cents a barrel to the OSP when Exxon sold a cargo to a Chinese buyer on Tuesday, they added.
The oil major does not typically comment on commercial matters.
There is a sense of “panic buying” among some refiners amid the supply tightness, said a fourth refinery source.
But no trades have been done at high price levels, as refiners held back amid poor refining margins, the sources said.