RIYADH: Saudi Aramco may have shot itself in the foot by unexpectedly increasing the price of its crude oil to Asia, with a major Chinese refiner responding by sharply cutting back on the volume of cargoes from the world’s top exporter.
Sinopec, Asia’s largest refiner, aims to slash its crude oil imports from Saudi Arabia’s state producer by 40 percent in May, according to an official from the company’s trading arm Unipec.
Such a large cut sends two very clear messages to Aramco, the first being that Sinopec didn’t agree with the price hike, and the second that the Chinese refiner feels it can make up any shortfall from other suppliers.
It’s an almost unprecedented response by a significant buyer of Saudi crude, and it underlines the extent to which the market was caught by surprise by Aramco’s decision to increase the official selling prices (OSPs) for May-loading cargoes.
And it’s not just Sinopec that is sending a message, with trading sources at two North Asian refiners saying they also plan to reduce volumes from Saudi Arabia by 10 percent in May.
Aramco boosted the OSP for its benchmark Arab Light grade for Asian customers for May cargoes to a premium of $1.20 a barrel over the average of quotes for regional grades Oman and Dubai, up 10 cents from the prior month.
The market had been expecting a cut of between 50 and 60 cents a barrel, based on movements in the price curve between front- and third-month cash Dubai prices.
