Asia Refiners to Reduce Saudi Crude and Face Tighter Margins After OSP Rise

Asian refiners are likely to reduce purchases from Saudi Arabia for July following the announced production cut and higher prices for the month. Buyers in Asia are likely to increase spot cargo purchases from United Arab Emirates instead according to Reuters sources.

• Saudi Arabia yesterday unexpectedly raised the July OSP of Arab Light crude to Asia to a six-month high after pledging to cut production by a further 1mbpd to 9mbpd in July.
• A shift in supplies could boost demand and spot prices of ADNOC's flagship Murban and Upper Zakum crude.
• The volume of Arab Medium crude and possibly Arab Light are likely to reduce in line with Saudi Aramco's pledge to cut production.
• The higher prices for Saudi crude could negatively impact Asian margins with some refiners outside China and India having little flexibility of supplies. China and India have the option of buying cheaper Russian oil instead.