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Asia’s oil refiners, responsible for meeting about a third of the world’s fuel consumption, are getting ready to go elsewhere for crude should Saudi Arabia and Russia’s latest pledged output cuts deprive them of barrels.
The two producer countries said on Monday that they will prolong and deepen output cuts into August. Along with reductions they already made, and ongoing curbs by other nations in the OPEC+ alliance, total supply curtailments will amount — on paper at least — to 3.1 million barrels a day, or about 3% of global consumption.
Traders in Asia said there’s a plentiful supply of barrels from producers outside of the 23-nation alliance — particularly in locations like the US, West Africa and the North Sea — that they will turn to if the region does bear the brunt of the latest cuts.
Any influx into Asia of oil from the Atlantic Basin could be a mixed blessing for Middle East producers. On the one hand, it could help to drain supplies in the US and Europe, home to the world’s most traded oil futures contracts. On the other, it could mean losing a share of the fastest growing demand market.
So far, the production jolts by Saudi Arabia and its allies have failed to make any meaningful difference to headline oil prices, which have been stuck at between $70 and $80 a barrel for weeks. That said, prices for grades that are similar to those that the kingdom pumps have rallied more strongly, catapulting them above Brent last week.
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