Saudi says will meet oil commitment to Asian refiners

RIYADH - Saudi Aramco has informed at least six refiners in Asia that it will supply full allocated volumes of crude oil in October following attacks on Saudi oil facilities on the weekend, although at least one has been told of a grade switch partially.

Saudi Arabia has said it would be able to meet oil customers' demand from its ample storage. But this is the first indication that its supply to top consumers in Asia - who consume more than 70% of total Saudi crude exports - will largely remain stable.

Three state-owned refineries in India - Indian Oil Corp , Bharat Petroleum Corp Ltd and Mangalore Refinery and Petrochemicals Ltd will receive full allocated volumes of crude oil from Saudi in October, three industry sources told Reuters.

But Aramco has informed India's top refiner, IOC, that it would give some volumes of Arab heavy instead of Arab mix oil, said one of the sources, who declined to be identified as he is not authorised to speak to media.

This indicates that the Kingdom is offering heavy crude instead of light crude as Arab Mix is a combination of Arab light and heavy.

No immediate comment was available from IOC.

The key Abqaiq processing plant was one of the facilities hit on the weekend. It processes crude from the Ghawar, Shaybah and Khurais fields that produce Arab Light or Arab Extra Light.

BPCL'S head of refineries, R. Ramachandran, told Reuters that his company would get full volumes from Aramco for September and October without any change in the crude grade.

Two refiners, in China and Taiwan, also said Saudi Aramco had told them that there was no change to the loading schedule in September and October.

"Saudi has confirmed (to us) that our refinery will fully get its requested loading in September and October. We have not been asked to switch or delay," one of the sources said.

Saudi Aramco informed PetroChina on Tuesday that some of its loadings of light crude oil for October will be delayed by up to about 10 days, though it will still supply the same grades and volumes of light crude oil requested for October nominations, a senior Chinese state oil source with knowledge of the matter said.

State-owned Bangladesh Petroleum Corp (BPC) will receive the full volume allocated for October, a senior BPC official said.

"Yesterday, we had a discussion about the next shipment and they assured us that there will be no delay," the official said.

Some 100,000 tonnes of Arab Light crude oil is scheduled to be loaded on Sept. 28. BPC imports 700,000 tonnes of Arab Light from Saudi Aramco annually for its sole refinery.

In the Asia market, refineries in Japan, South Korea, India and Thailand are main buyers of Saudi's Arab Light and Arab Extra Light, according to one of the sources.

In South Korea, there has been no indication of disruptions to term supply, a Seoul-based source said.

Officials from Japan's JXTG Holdings, Idemitsu Kosan Co Ltd and Cosmo Energy Holdings Co Ltd said they were collecting information but declined to comment further on Saudi Arabian oil or alternative supplies.

While refineries are able to source for alternative crude grades from the United States, West Africa and Southeast Asia should there be a disruption to supply, spot premiums for light crude are expected to rise, two trade sources said.

"Heavier condensate, the middle distillate-rich grades such as deodorised field condensate (DFC), can also be used as alternative for light crude if light crude gets very expensive," a trade source said.

Production halted

A report from S&P Global Platts on Tuesday said around three million barrels per day of Saudi oil will remain offline for a month, about half the production halted by the weekend's devastating attacks.

The report came as oil prices dipped slightly following record gains Monday as uncertainty prevailed on global markets.

Strikes on Abqaiq -- which is the world's largest processing plant -- and the Khurais oilfield that the US has blamed on Iran have knocked out 5.7 million barrels per day (bpd), or six percent of global production.

"At this point, it looks likely that around 3.0 million bpd of Saudi Arabian crude supply will be offline for at least a month," S&P Global Platts said in a report.

Saudi Energy Minister Prince Abdulaziz bin Salman is scheduled late Tuesday to hold his first press conference since the attacks, with the expectation that he will give an update on efforts to restore lost production.

Riyadh pumps some 9.9 million bpd of which around 7.0 million bpd are exported, mostly to Asian markets.

"Saudi Arabia will likely say that they can fully supply their customers, although as time goes on this may be challenging. Any indication of delays or supply tightness will lead to further price increases in the weeks/months ahead," S&P said.

The threat of a prolonged supply outage from Saudi Arabia highlights the lack of spare production capacity in the market, estimated at 2.3 million bpd, most of it held by Riyadh, the energy news provider said.

Reports on Monday had said the kingdom was likely to restore up to 40 percent of the lost production immediately, but experts had conflicting views on how long it would take to bring production back to pre-strike levels.

The crisis has revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world's top exporter as well as for other producers.

London-based Capital Economics said global crude stocks, estimated at around 6.1 billion barrels, should be able to compensate for the lost output.

It said that if Saudi Arabia manages to restore full production by next week, oil prices would quickly come down to around $60 a barrel.

But if it takes months and tensions persist, Brent crude prices could hit $85 a barrel, it said.

Brent was trading above $68 per barrel on Tuesday, easing slightly after surging by 20 percent at its peak on Monday -- the biggest gain since the 1991 Gulf War.

Yemen's Iran-aligned Huthi rebels claimed responsibility for the weekend attacks but the United States put the blame on Tehran.