Saudi Arabian Oil Co. (Aramco) has notified Japanese oil distributors that it will reduce crude oil supplies to Japan by about five percent in December, Japan’s leading business daily reported.
The move is in line with the decision made in October by the Organization of Petroleum Exporting Countries (OPEC) to reduce production, the Nikkei Shimbun said, adding that this will be the first time in 22 months for Saudi Aramco to cut supplies to Japan, the world’s third-biggest oil importer after the US and China.
Saudi Aramco is the largest supplier of crude oil to Japan, accounting for 27 percent of the nation’s imports.
Saudi Aramco produces about seven million barrels a day (bpd) for export. Of the OPEC production cut of 1.5 million bpd, Saudi Aramco is to reduce daily output by 466,000 barrels. This means that of the 3.5 million to 4.0 million barrels intended for Asia, Saudi Aramco will cut daily shipments by 200,000 barrels, the daily said. The reduction amount is to be revised every month, but it is seen as likely that the cut will be kept in place.
Saudi Aramco has already scaled back supplies to North America and Europe, starting this month, and now ships 3 million to 3.5 million bpd into those markets. In cutting supplies to Asia, it will mostly reduce shipments of heavier crude grades.
Although the move will tighten domestic supplies of such oil products as gasoline and kerosene, it is unclear how prices will be affected because demand continues to slump, the report said. Some experts point out that the supply-demand balance will not improve unless there are sharp cuts in light crude oil, which is refined to make gasoline, naphtha and kerosene.
(Kuwait News Agency & Zawya)