State-owned oil behemoth Saudi Aramco has rejected at least three Asian refiners' requests for additional bargain-priced crude for April, despite a recent pledge by the kingdom to boost supplies to a new record, said sources.
The refiners - one Korean, one Taiwanese and one Chinese, had requested extra barrels of Saudi oil in a so-called nomination process for April - on top of their long-term supply deals - following the steep price cuts announced by Aramco at the weekend, but were turned down by the producer.
However, Saudi Arabia did approve incremental supplies for its top Indian and Chinese customers, including Bharat Petroleum Corp (BPLC), Reliance Industries Ltd, at least one Chinese state refiner, and privately held Zhejiang Rongsheng Holding Group, to fend off market share threats in top Asian oil markets India and China, said sources.
"We have got all we asked for," one of the sources said of the nomination results. Reliance, operator of the world's biggest refining complex, and BPCL have each bought 2 million barrels of extra Saudi oil for loading in April. BPCL is taking a mix of Arab light and Arab medium grades.
Major refiners in Europe which ordered extra volumes of April oil from Saudi Arabia are also waiting to receive nominations for the volumes, three sources in oil companies said on Thursday.
European refiners including France's Total, Azerbaijan's SOCAR and Finland's Neste Oil, all big buyers of Russia's Urals, ordered extra volumes of Saudi crude, but haven't seen nominations confirmed by Saudi Aramco yet. "Many refiners in Europe are waiting to be nominated. We are as well," a trader said.
Saudi Arabia said on last Tuesday it would increase supplies to a record 12.3 million barrels per day (bpd) in April, or 300,000 bpd above its maximum production capacity, indicating it may draw from storage.
Saudi's increased supply was mainly for the lighter grades, while the increase in medium and heavy grades appeared to be limited, two of the sources said.
Some Saudi crude term contract holders believed the producer was playing a strategic game during its allocation of extra April crude barrels to beat competitors in targeted markets while taking care of its core clientele, some sources said. "Saudis are trying to fight against Russia and shale producers in U.S," said a trader with a North Asia refinery.
"India is a pretty big Russian barrel buyer for Urals. For the Koreans and Japanese they don't buy much Russian (crude) except ESPO, and they will buy U.S. (crude) anyway." Some Asian buyers that had their requests rejected were not happy, while a few were still trying to negotiate extra barrels.
Due to the Saudi price cuts, many Asian buyers had asked to load more in April, while a contango market structure supports oil storage, boosting competition for the extra barrels.
Some buyers in Asia had asked for three times the usual amount of Saudi crude, said Lachlan Shaw, head of commodities research at National Australia Bank in Melbourne, noting that the discounts in official selling prices set last week were bigger for other areas outside Asia.
But at least three Asian refiners - one Chinese and two Japanese - did not seek more than their usual volume due to lingering concerns about limited storage space, weak demand and the downward price trend, three sources at the refineries said.
