Saudi Aramco has informed several of its key Asian customers that they will receive their full contracted volumes of crude oil in July, despite the Kingdom pledging to reduce overall output by 1 million barrels per day next month.
The state-owned oil giant has told at least five buyers in North Asia - including major Chinese refiners - that they will be supplied their nominated volumes as stipulated in supply contracts, according to sources familiar with the matter.
The move signals Saudi Arabia's aim to fulfill its term supply agreements with key customers, even as it cuts production to stabilize global oil markets. The cuts are part of the broader OPEC+ accord to rebalance supply and demand.
However, some Chinese refiners had requested lower volumes for July deliveries, estimating a potential 10 million barrel reduction in purchases from Saudi Arabia compared to June levels. The requests were likely due to weaker margins from refining heavier Saudi crudes.
Meanwhile, Saudi Aramco unexpectedly raised its official selling prices for all July crude cargoes to Asian buyers, a move that could squeeze refining profits. The price hikes may prompt some refiners to make up shortfalls by buying more oil from the spot market.
Nonetheless, China's total imports of Saudi crude for July are projected to be around the same level as June, as some other Chinese refiners have requested higher volumes for July deliveries owing to low intake last month.
In summary, while Saudi Arabia is reducing its aggregate production next month, it appears to be prioritizing fulfilling contractual supply commitments to key Asian customers over maximizing volumes. And Chinese buyers, despite some requests for lower loads, are set to import a similar amount of Saudi oil in July as the previous month.
