Oil buyers ask Saudis for more crude in supply hunt

Serene Cheong, Sharon Cho and Debjit Chakraborty May 02, 2019

SINGAPORE and NEW DELHI (Bloomberg) -- Asian refiners are asking Saudi Arabia for more crude as buyers in the world’s top oil-consuming region face supply disruptions from Iran to Venezuela, according to people with knowledge of the matter.

Customers are seeking additional cargoes for loading in June and July from OPEC’s biggest producer, said the people, who asked not to be identified because the information is confidential. The requests are for supplies on top of what the refiners are due as part of term contracts with state-run Saudi Aramco, they said.

The scramble for shipments follows a U.S. decision to end sanctions waivers for buyers of Iranian oil after current exemptions expire on May 2. Unexpected disruptions to supply from Russia and Nigeria as well as turmoil in OPEC member Venezuela are also adding to fears of a crunch. Prices have seesawed in the past week on uncertainty over how Saudi Arabia will respond, with the American administration saying the kingdom will pump more.

While Saudi Oil Minister Khalid Al-Falih has said the producer will seek to keep the market balanced, he’s also signaled that OPEC and its allies including Russia could extend output curbs until the end of this year. In Asia, the end of the U.S. exemptions that allowed purchases from Iran has caused a headache for processors, who are being forced to seek potentially costlier alternatives.

Some Asian refiners are asking Aramco for more crude even before the producer sets the cost for the cargoes, the people said. Official selling prices for June-loading shipments are expected to be announced only by the end of this week. Usually, buyers will request supplies a few days after the company sets prices for the month. Aramco’s press office couldn’t immediately comment.

The market could suffer a loss of as much as 900,000 bpd of Iranian oil, according to Goldman Sachs Group, after the U.S.-issued waivers expire. The resulting shortfall is expected to be offset by higher production from core producers in OPEC and Russia, the bank said, while warning of higher price volatility in coming months.

In a Twitter post last month, President Trump reassured global markets that “Saudi Arabia and others in OPEC will more than make up the oil flow difference in our now full sanctions on Iranian oil."

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