SEOUL/LONDON, 12 March 2004 — Saudi Arabia on Wednesday told leading crude customers it was cutting supplies for April, implementing part of a February OPEC agreement to reduce oil production, traders said. But some Saudi customers were spared cuts.
The industry sources estimated the reductions, shouldered mostly by integrated major companies and Asian buyers, indicated a worldwide Saudi cut of no more than 250,000 bpd.
State oil company Saudi Aramco informed its biggest buyers, the four world oil majors, of supply reductions for April of 8-11 percent. Aramco sliced April export allocations to the majors to 30-35 percent below full term contract volume from about 20-25 percent below contract volume in March, the traders said.
“They’re serious about it this time,” said a dealer at one major company. But another said the blow would be softened because his company could exercise its right to maximize “volume tolerance” in April, allowing it to supplement supplies.
Japanese and South Korean buyers were told to expect a reduction in April of about three percent, to 12 percent below full contract volumes in April from 8-10 percent below full contract in March. “The cut was expected in line with the OPEC agreement, but will have an impact on the market,” said a trader at a Japanese refiner. Some of Riyadh’s customers will get unchanged volumes.
Smaller European and US refiners, which buy on a delivered basis, were spared Saudi reductions for April, with their export allocations held steady at about 35 percent below contract, traders said. And an official at China’s Sinopec Corp, Asia’s top refiner, said there would be “no big change” in its April volume. He declined to elaborate.
OPEC agreed at a meeting in February to eliminate 1.5 million barrels a day of quota busting and cut another one million barrels daily from quota limits in April.
Saudi accounts for a third of OPEC output, meaning it would need to cut just over 800,000 bpd of the total agreed 2.5 million bpd OPEC cut to meet a new quota in April of 7.64 million bpd. Saudi supplies to its foreign joint venture refining partners and its domestic refineries, totaling some 3.5 million bpd, are not part of Aramco’s monthly export nomination procedure.
US crude traded near $36.30 a barrel yesterday and OPEC’s reference crude basket has been valued above the group’s official $22-$28 target range for all but one day during the past four months.
