Saudi switches crude grades, delays oil supplies to buyers in Asia

Credit: REUTERS/Ahmed Jadallah

By Florence Tan, Jessica Jaganathan and Jane Chung

SINGAPORE, Sept 20 (Reuters) - State oil giant Saudi Aramco has switched crude grades and pushed back crude and oil products deliveries to customers by days after the attacks on its supply hub severely reduced its light oil production and led to output cuts at its refineries.

Crude oil loading delays were widespread as most buyers have received Aramco's request to push back shipments in October by 7-10 days, several sources with knowledge of the matter said, giving the producer more time to maintain exports by adjusting supplies from inventories and its refineries.

At least three supertankers that loaded crude in Saudi Arabia this week for China and India had their crude grades switched from light to heavy oil while more buyers in Asia have been asked to delay shipments and switch grades in September and October, according to sources with knowledge of the matter and data from Refinitiv and Kpler.

Unipec, the trading arm of Asia's largest refiner Sinopec 600028.SS, will lift Arab Heavy crude instead of Arab Light and Arab Extra Light onboard Very Large Crude Carriers (VLCCs) Caribbean Glory and Xin Lian Yang this month.

Sinopec declined to comment.

VLCC Kalamos will also load Arab Heavy instead of mostly Arab Extra Light for Indian Oil Corp IOC.NS.

IOC does not comment on commercial matters. The sources declined to be named as they were not authorised to speak to media.

Saudi Aramco is drawing down Arab Heavy crude from its inventories to replace oil grades, said an oil analyst who also declined to be named.

"Saudi always destocks oil in July and August. So the current inventory level would be around 170 million to 175 million barrels," the analyst said.

"This could last 25 days in theory. In practice, it may be even less."

Two South Korean refiners have also agreed to switch out light grades for Arab Medium and Arab Heavy cargoes loading this month and next, sources said.

Heavier Saudi crude grades yield more high-sulphur fuel oil than the lighter ones, but Asian refineries are able to adapt quickly because most of the plants are equipped with secondary units that can process the residue into higher quality oil products, the sources said.

"There will be a little more burden on secondary units," one source said, but "we just inform the refineries that grades will change and they will manage somehow."

Bahrain's crude exports were also disrupted after a Saudi-Bahrain crude pipeline was shut. VLCC Tango which was scheduled to load Banoco Arab Medium crude earlier this week from Ras Tanura for Japan is still waiting, one of the sources said.

"They informed us (of the delay) but every day it's revised," he said.

"I'm afraid the situation is more serious than we assumed but still information is limited."

Spot premiums for a wide range of crude and condensate from the Middle East and Russia jumped this week on Saudi supply disruption.

The change in Saudi crude grades and loading delays are expected to continue in October despite a Saudi pledge to restore lost production by the end of September.

In addition to crude, Saudi Aramco has also delayed the delivery of spot diesel cargoes to a customer by 4-7 days, another source said.

Saudi Aramco has also bought two diesel cargoes which will be sold to Europe and Africa as cargoes from Saudi refineries, a separate source said.

(Reporting by Florence Tan, Jessica Jaganathan, Shu Zhang, Nidhi Verma, Koustav Samanta and Aizhu Chen in SINGAPORE, Jane Chung in SEOUL; editing by David Evans)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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