Saudi Arabia’s surprise announcement that it would cut 1 million barrels per day (bpd) beyond its share of OPEC+ cuts in February and March has refiners in Asia scrambling to secure supplies from Europe, with record purchases of North Sea cargoes in one day.
Saudi Arabia caught the market by surprise earlier this week when it said after the end of the OPEC+ ministerial meeting that it would unilaterally cut 1 million bpd off its crude oil production for the next two months.
While the Saudi move has been supporting oil prices all week, the tightening supplies out of the world’s top oil exporter have apparently upended the plans of Asian oil buyers.
A day later, the Saudis also raised the official selling prices (OSPs) of their oil for Asia for February, lifting the price of the flagship Arab Light grade by $0.70 a barrel to a premium of $1 per barrel against the Middle East benchmark, the Oman/Dubai average.
The major cut and the higher prices from the Kingdom have prompted Asian refiners to source oil from elsewhere, and North Sea cargoes seem to have benefited from the Saudi production cut.
According to Reuters, seven crude oil cargoes from the North Sea were bought and sold during a trading window on Thursday alone, and this, according to an oil trading source, was a daily record for North Sea cargoes traded in one day in recent history. Typically, one or two cargoes of 600,000 barrels of crude each are being traded on a normal day in normal circumstances, according to Reuters.
Four of the seven North Sea cargoes on Thursday were acquired by China’s Unipec, the trading arm of the largest oil refiner in Asia, Sinopec, trade sources told Reuters.
According to Bloomberg, crude outside the North Sea is also in demand in Asia, such as the CPC blend of Kazakhstan.