Saudi Arabia is set to reduce its crude oil supply to China in June by 5.8 million barrels compared to May, according to sources familiar with the matter. The cuts come after Saudi Aramco, the state-owned oil company, hiked its official selling prices (OSPs) for most of its crude to Asia to the highest level in five months, despite weak refining margins.
The volume of Saudi crude to be loaded for China is estimated to fall from 45 million barrels in May to 39.2 million barrels in June. The cuts are primarily for Arab Medium and Arab Heavy crude, with a 6.8 million barrel reduction for state and private refiners, and a 1 million barrel increase for one private refiner.
The sources attributed the cuts to the high OSPs set by Saudi Aramco as well as the weak profit margins currently faced by Chinese refiners. Additionally, Saudi Arabia may require more crude to fuel power plants during the summer season.
Meanwhile, three other refiners in Northeast Asia will receive their full contractual supplies in June.