Saudi-led Opec+ cuts prompt brisk buying from top Asia importers

ASIA’S top oil importers are snapping up spot cargoes after Saudi-led Opec+ output cuts and higher selling prices rocked the global crude market, leaning in to grab barrels even as refining margins show signs of strain.

Refiners from Japan to Thailand and China were out to buy spot shipments for June loading this week at a brisk pace, soaking up grades from the Middle East and supporting the region’s Dubai benchmark price, according to traders who asked not to be identified. Offers for Russia’s Espo crude also rose on-month.

The global crude market was jolted this month – with futures hitting the highest level so far this year – after the Organization of Petroleum Exporting Countries and allies including Russia unleashed a shock output cut. Following that collective broadside, Saudi Aramco jacked up official selling prices, prompting some buyers in Asia to seek seek alternative cargoes.

Abu Dhabi’s Murban and Umm Lulu crude were among grades sold to South Korean and Thai refiners this week at US$3.10-US$3.30 a barrel premium to the Dubai benchmark, said traders, while Qatar’s Al-Shaheen also traded. One Chinese buyer took Upper Zakum, while so-called teapots – a tag for non-state Chinese refiners – were eyeing up very cheap supplies of Iranian crude. 

Prompt May-June timespreads for Dubai benchmark crude strengthened to a backwardation of US$1.27 a barrel on Wednesday, compared with 83 US cents earlier this month, according to data from PVM Oil Associates. A backwardated front-month pattern is bullish, suggesting tight near-term supply.

Saudi Arabia hiked its May official selling price for flagship Arab Light crude in Asia this month, contrary to expectations for a reduction, after pledging a 500,000 barrel-a-day cut in production as part of the shock curbs by Opec+. BLOOMBERG

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