Several informed sources said that the giant Saudi Aramco plans to supply full crude contract volumes loading in May to several North Asian buyers despite its pledge to cut output by 500,000 barrels per day, Reuters reported.
This comes after the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+, surprised markets last week by announcing an extra output cut of 1.16 million barrels per day (bpd) from May for the rest of the year.
Investors are closely watching the quantities Aramco supplies each month as an indication of whether the planned production cuts will reduce supplies to Asia - the world’s largest crude oil import market.
A source at an Asian refiner, who declined to be named because he was not authorized to speak to the media, told Reuters that observers were wondering whether the voluntary production cut would really affect supply or if it was only intended to support oil prices.
The OPEC+ announcement caused Brent and US West Texas Intermediate crude futures to jump 6% last week, returning to levels last seen in November.
Last week, Saudi Aramco also surprised the market by raising prices for the Arab Light crude it sells to Asia for a third month in May. It also increased the prices of other oil grades to Asian clients amid expectations of tighter market supply.
Oil demand in Asia was expected to decline in the second quarter, with several Asian refineries cutting their refining capacity by a total of 1.15 million barrels per day.
Meanwhile, trade sources cited by Reuters said that Abu Dhabi National Oil Company (ADNOC), the UAE’s state-owned oil giant, has told at least three buyers in Asia that it will supply the full contracted volumes of oil to them in June.
The UAE intends to reduce its production by 144,000 barrels per day, starting in May, as part of the OPEC Plus production cuts.
Oil fell during Monday’s trading, after achieving gains last week for the third time in a row, due to investors’ concern about increasing interest rates that may curb the demand for oil.
The US dollar rose after US jobs data pointed to a tight labor market, heightening expectations of another Federal Reserve rate hike.
Reuters also reported that Brent crude settled down 96 cents, or 0.2%, at $84.58 a barrel while US West Texas Intermediate also fell 94, or 0.1%, to $79.74.
