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Saudi crude allocations tighten for European buyers
1/18/2021 12:00:00 AM

Saudi Arabia has reduced crude allocations for some of its term buyers in northwest Europe and the Mediterranean next month as it prepares for a deep cut in production.

One regional refiner said its allocation of February-loading Saudi crude has been cut to zero, and two others reported a partial reduction. One term buyer said its allocation is in line with the volumes it requested, while two others said they nominated no Saudi crude for February in response to higher-than-expected official formula prices.

Market participants had expected state-controlled Saudi Aramco to reduce its official February formula crude prices by as much as $1.50/bl for customers in northwest Europe and the Mediterranean, given the decline in spot trade of Russian Urals. But the company ended up trimming by just 50-70¢/bl following Riyadh's surprise decision to cut output by an extra 1mn b/d in February-March.

Aramco could be left with just 5.7mn b/d for export in February and March if Saudi Arabia's domestic crude consumption is similar to year-earlier levels and assuming there are no significant changes in inventories. This would mark a sharp decline compared with the 7.41mn b/d exported from onshore Saudi crude terminals, excluding the Neutral Zone, in February-March 2020, according to Argus tracking data.

Market participants said last week that some buyers in Asia-Pacific have had their February term allocations of Saudi crude trimmed by 5-15pc compared with their requested volumes. These cuts will largely affect the Arab Light and Arab Medium grades.

Source: Argus