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Surprise Saudi Move Leaves Asian Buyers Exploring More Russian, African Oil – Bloomberg

  • Refiners consider cargoes from Russia, Africa, US and Brazil
  • Processing margins are under strain due to weak demand

Serene Cheong, Sarah Chen, and Rakesh Sharma, Bloomberg News

Energiesnet.com 06 06 2023

Some Asian refiners are considering buying more crude from Russia and Africa after Saudi Arabia surprised the market by raising prices for its oil following an unexpected pledge to reduce output.

At least three Asian refiners are considering asking for less contracted crude from Saudi Arabia in July, and may tap the spot market for cheaper cargoes, according to people familiar with the companies trading strategies. Barrels could also be sourced from the Persian Gulf, the US or Brazil, they said.

Saudi Arabia increased its official selling prices for all regions for July after the OPEC+ producer pledged extra supply cuts for the same month to stabilize the oil market. Asian refiners are grappling with lackluster refining margins due to weaker demand, and some are mulling curbs to operations.

“This move is going against the market,” said Gao Mingyu, the Beijing-based chief energy analyst at SDIC Essence Futures Co. It will make alternatives such as Russian crude more attractive for buyers, she added.

However, buyers may find it difficult to source spot crude because there are few July cargoes available as the usual trading cycle has passed, said traders who participate in the market. Some Chinese refiners also submitted supply requirements before the pledged output cut and may not be able to change the requested volume due to contract obligations, said refiners, asking not to be named.

survey of buyers in Asia prior to the OPEC+ meeting signaled expectations for a price cut, with traders on Monday moderating their estimates after the Saudi pledge to reduce supply but still predicting a price decrease.

“It’s unlikely to impact Indian refiners as currently Middle Eastern supply to India is less than what we used to have in the past,” said Mukesh Surana, the chief executive officer of Ratnagiri Refinery and Petrochemicals Ltd. “Cheaper crude oil from Russia has caused a rebalancing of India’s crude basket.”

— With assistance by Serene Cheong, Sarah Chen, Rakesh Sharma and Alfred Cang

bloomberg.com 06 06 2023

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