LONDON: Asian refiners have emerged as the big winners from Saudi Arabia’s latest official selling prices for its oil exports, according to energy analysts at WoodMac.
Recently announces selling prices for May reflect the importance of Asian customers it said in a report released on Thursday.
“Looking at the May prices, it is clear that Saudi Arabia wants to ensure its crude remains very competitive in Asia,” said Wood Mackenzie research director Sushant Gupta. “It has almost doubled the discounts to Asian refiners in May 2020 compared to April 2020. Asian refiners are to enjoy the steepest discounts compared to other regions.”
Saudi Arabia increased the May 2020 official selling prices to US refiners, indicating a desire to export lower volumes to the US, WoodMac said.
The research group expects crude runs in Asia to recover from a low point of 26 million barrels per day (bpd) in April 2020 to about 29 million bpd by June 2020, as a result of an expected recovery in oil demand.
“To meet the entire demand from the refining system, Asian refiners will need to draw down crude inventories built through H1 2020 in their respective countries, and crude producers will have to rely on selling crude from inventories built through April 2020. This will support crude prices,” said Gupta.
“We see large changes to crude supply sources for Asian refiners as they rely heavily on crude producers directly impacted by the OPEC+ deal, such as Saudi Arabia, Iraq, Kuwait, the UAE, Angola, Nigeria and Russia. Asia represents a significant share of the exports from these countries.”
The renewed focus on Asian export markets follow a month of unprecedented upheaval in the global energy sector as demand has plummeted in the wake of lockdowns triggered by the spread of the coronavirus.
“With deeper discounts to Asia, Saudi Arabia is ensuring that it does not lose access to buyers if oil demand remains weak,” said Gupta. “Other suppliers looking to position themselves in Asia will have to pay close attention to the Saudis’ pricing.