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Saudi Arabia cuts March crude supply to some Asian buyers

February 13/2020

MOSCOW (MRC) -- The worlds top oil exporter Saudi Arabia has reduced crude supplies to some Asian buyers in March after refiners cut output following the coronavirus outbreak and for regular maintenance, four sources with knowledge of the matter said, as per Reuters.

The drop in supplies comes after state oil giant Saudi Aramco cut March official selling prices (OSPs) more than expected. Buyers overall nominations for March-loading cargoes were lower, but so far the virus has not had a big impact, a source familiar with Aramco oil exports said, adding that seasonal maintenance in Asia in the second quarter had made more difference.

Two of the sources declined to say how much lower the volumes were at their refineries, but said Saudi Aramco may have allowed some Chinese buyers to reduce their volumes by more than 10% as their situation was an exceptional case. Another of the sources said its refinerys March loading reduction was caused by scheduled maintenance.

Chinas refiners, including state-owned Sinopec Corp, PetroChina, China National Offshore Oil Company, and independent refiners such as Hengli Petrochemical and those in Shandong have cut their crude processing rate in February.

The spread of the coronavirus in China has killed more than 1,100 people and slowed the worlds second largest economy.

Saudi oil contracts allow the seller or the buyer to adjust loading volumes by plus or minus 10% of contracted volume, depending on demand and shipping logistics under a contractual clause known as operational tolerance.

As MRC informed earlier, Saudi Arabia, the worlds biggest oil exporter, may cut the prices of its light crude grades sold to Asia in February on signs of slowing demand ahead of the regions peak refinery maintenance season.

Saudi Aramco officials as a matter of policy do not comment on the kingdoms monthly OSPs.

As MRC wrote before, Saudi Aramco, which temporarily lost half of its oil production following the September 14 attacks on two key oil facilities, has been running its local refineries at full capacity since November 2019 and is forging ahead with plans to start up new refineries. The company is also starting up a joint venture refinery in Malaysia in 2020. According to Aramco's bond prospectus released in April, the refining and petrochemical joint venture with Petronas - the Malaysian national oil company - collectively known as PRefChem, was supposed to start this year.

The PRefChem joint venture includes a 300,000 b/d refinery, an integrated steam cracker with capacity to produce 1.3 million mt of ethylene located in Johor, Malaysia. Aramco was supposed to provide a significant portion of PRefChem's crude supply under a long-term supply agreement. Jazan and PrefChem will help Aramco reach a gross refining capacity of 5.6 million b/d, it said in the prospectus. The company currently owns and has stakes in four refineries abroad with a total refining capacity exceeding 2 million b/d.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, Saudi Aramco.
Category:General News
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