Asia Buyers Lose Out as Saudis Prioritize Oil Sales to Europe
Three-phase spheroids stand behind pipelines at Saudi Aramco’s crude oil processing facility, in Abqaiq, Saudi Arabia (Photographer: Dina Khrennikova/Bloomberg)

Asia Buyers Lose Out as Saudis Prioritize Oil Sales to Europe

(Bloomberg) -- At least three Asian refiners who tried to get additional volumes in the scramble for cheap Saudi Arabian crude failed to secure the type of oil they requested.

Two of the buyers from north Asia declined the extra supply offered in April because of the quality mismatch, according to people with knowledge of the requests, who asked not to be identified because the matter is private. The refiners were offered crude that was both lower and higher quality than the flagship Arab Light grade they wanted.

Asia Buyers Lose Out as Saudis Prioritize Oil Sales to Europe

Oil buyers across Asia, Europe and the U.S. have joined the queue for more Saudi crude via long-term contracts after state-run Saudi Aramco slashed official selling prices by the most in at least 20 years and pledged to ramp up output to record levels as it embarked on a price war with former ally Russia. The failure by the Asian refiners to get their preferred grade suggests Aramco is prioritizing sales to Europe, normally the backyard for Russian oil sales.

Saudi Arabia is unleashing a wave of crude toward Europe, pledging to supply regional refineries with as much as triple their usual intake from the kingdom. Prices for Europe and U.S.-bound shipments were cut by more than Asian cargoes, another sign of where the battle for market share is going to be fought most bitterly. Aramco didn’t immediately comment on the matter.

In contrast to the north Asian refiners, Aramco satisfied all requests from Indian processors who asked for more oil for April, according to a person familiar with the South Asian purchases, who asked not to be identified as information is private. Bharat Petroleum Corp. was given the extra 2 million barrels of Arab Medium crude it requested, according to R. Ramachandran, refineries director at the processor.

Quality Mismatch

Among the north Asian refiners, two of the three who sought extra shipments of Arab Light were instead offered Arab Medium and Arab Heavy, while the third company was offered Arab Extra Light crude, the people said. Some refused the oil, citing incompatibility with the rest of their crude slate for the month.

Earlier this week, several processors in Asia sought between 30% to 50% more supplies than they had originally planned in April after the release of official prices by Saudi Arabia.

Meanwhile, major European buyers including Royal Dutch Shell Plc, BP Plc and Total SA all received their monthly term volumes from Aramco and they were significantly above normal levels, according to people familiar with their operations. The range of extra supplies was between 25% and 200%, they said.

©2020 Bloomberg L.P.

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