Monday, May 10, 2010

Saudi to keep full crude supplies to Asia

Saudi Arabia, the world's top crude oil exporter, will maintain full volumes to its main Asian customers next month, suggesting it is content with current oil prices.

State oil firm Saudi Aramco informed at least four term buyers in Asia over the weekend that it will supply full contracted volumes of crude oil in June, steady with May levels, industry sources said on Monday.

"It looks like they've decided to stop supply cuts to Asia for good," said one source at a term buyer who spoke on condition of anonymity.

Buyers in China and Taiwan were not immediately available for comment.

The oil giant also made no changes to the operational tolerance level in the supply allocations, the sources said, indicating that buyers can still choose to ask for cargoes to be loaded with up to 10 per cent more or less crude than contracted volumes.

One source indicated his intention not to exercise the tolerance option.

The kingdom had been expected to supply fully contracted crude supplies in June, something it has been doing since January to most of its customers, after reducing supplies for much of 2009 in accordance with an Opec pact to curb production.

Opec has kept its supply targets unchanged after announcing in December 2008 a record supply cut of 4.2 million barrels per day (bpd) to combat the economic crisis, which battered oil demand and prices.

But as oil prices have risen from a low near $32 hit in December 2008 some Opec members have informally boosted output, leading compliance to the group's targets to fall to 51 per cent in April, according to a Reuters survey.

Saudi Arabia and other core Gulf Arab producers like Kuwait and the UAE, however, have held the line and pumped close to target despite higher prices.

Supplies from Saudi Arabia, Opec's top producer, were estimated around 8.25 million bpd in April, up slightly from March amid increased crude oil use in domestic power plants, but only 200,000 bpd over its implied target.

Benchmark US crude hit a 19-month intraday trading high above $87 a barrel last Monday, but has since fallen back sharply, standing around $76.45 early on Monday.

The extent of the fall and the volatility could worry some in Opec, supplier of more than a third of the world's crude oil, but the price is back in the $70 to $80 per barrel range Saudi Arabia has said is fair for consumers and producers.

Opec is not scheduled to meet formally until October. – Reuters

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