Saudi Arabia reduced crude oil supplies to at least 11 refiners in Asia and most buyers in Europe after the kingdom volunteered to cut its production by 1 million barrels a day for February and March.
Aramco will supply less crude as part of long-term contracts next month, giving some Asian processors 20%-30% less than they had sought, according to company officials who received the notices but asked not to be identified as the information is private.
Supplies to most European refiners were also cut and one refiner that typically buys small volumes from Saudi Arabia will not get any cargoes for February.
Supply cuts were focused on heavier grades such as Arab Medium and Arab Heavy, the officials said. State-owned Aramco declined to comment.
Saudi Arabia’s move to sell less oil comes amid an overall decline in crude demand across Asia due to peak refinery maintenance season from March to April.
Separately, the resurgence of Covid-19 infections across Asia and Europe, and the declaration of a state of emergency in parts of Japan and Malaysia, are also reducing fuel consumption and keeping refinery run rates low.
Five other Asian processors sought less crude for February and received the volumes they requested, officials said. Aramco hiked its official selling prices for all sales to Asia and the U.S. last week after its surprise announcement to implement deep cuts for the month.
Across Asia, refiners had been anxiously awaiting Aramco’s release of so-called allocations for February on expectations of tighter supply.
The size of Saudi Arabia’s curbs was larger than the market had anticipated, coming on top of Abu Dhabi’s move to cut Asian term volumes for key grades by 20% next month.
Despite lower crude demand due to maintenance closures across Asia and lean margins, regional processors that were hit by supply cuts may seek prompt spot cargoes — some shipments are still available from last month — to make up for shortfalls.
Other alternatives include short-haul Russian barrels such as ESPO and Sokol for March loading that can reach North Asia in less than a week.