Saudi Aramco Plans to Reduce Asian Exports by 14%

South Korean refinery officials revealed yesterday that Saudi Aramco (Saudi Aramco) plans to cut its Asian oil exports by 14% in February 2007.

Driven by Saudi Arabia's decision, Iranian companies also increased their official selling prices for heavy crude oil shipped to Asia in February.

The above two giants’ approach is likely to become the consensus of OPEC member states. China is the largest buyer of Middle Eastern oil. Yinjian Futures Zhao Yucheng believes that Sinopec’s crude oil costs are about to rise across the board.

China’s refining and chemical companies suffer the most

South Korean and Japanese refinery officials respectively stated that Saudi Aramco's oil supply to Asia in February will be 10% to 14% lower than the contracted supply, exceeding the 8% to 9% in January. Saudi Arabia's planned production cuts in February are the first to exceed contract limits since OPEC decided to cut production.

The products that Saudi Arabia cut in February were mainly Arabian medium oil and Arabian heavy oil.

At the same time, Saudi Arabia also increased the official selling price of heavy oil in February, a move that will make up for Saudi Arabia's losses from reduced supply.

Saudi Aramco raised the February official selling price of Arabian medium oil by 30 cents, and also raised the February official selling price of Arabian heavy oil by 50 cents to a discount of $5.50.

Yesterday, affected by Saudi Arabia's decision, Iran, OPEC's second largest oil reserve country, also announced that it would increase its official selling price of heavy crude oil shipped to Asia in February to a discount of US$3.15 per barrel to the average price of Oman and Dubai. , up 30 cents from January OSP.

Analysts said that the impact of Saudi Arabia's reduction of crude oil supply to Asia on Japan and South Korea is limited, because on the one hand, these countries have rich strategic reserves and are not susceptible to short-term supply fluctuations; on the other hand, due to the relatively high refining rate of heavy and high-sulfur crude oil, Low, refiners in both countries do not tend to refine heavy, high-sulfur crude oil.

Zhao Yucheng believes that for the sake of saving foreign exchange, only Chinese refineries are more willing to import heavy, high-sulfur crude oil. Therefore, petrochemical companies such as Sinopec and Sinochem have been greatly affected.

China's crude oil imports increased by 14.5% in 2006 and are expected to maintain double-digit growth in 2007.

Crude oil prices are expected to rise

Saudi officials stated on the 8th that the country will reduce crude oil production by 158,000 barrels per day starting in February in accordance with OPEC’s second round of production reduction agreement.

The source said that Saudi Arabia will fully implement the production reduction agreement reached at the Abuja and Doha conferences. The country's total daily production cuts will reach 538,000 barrels. In addition to the 158,000 barrels of production cuts that began in February, there are also 380,000 barrels of daily production cuts that began in November last year. After the above-mentioned production reduction decision is implemented, Saudi Arabia's daily oil production will be about 8.5 million barrels.

Zhao Yucheng believes that Saudi Arabia’s choice of Asia as a reduction target is likely to become a consensus among OPEC member states.

Currently, OPEC’s decision to cut production has been resisted by the United States and the International Energy Agency (IEA). Lawrence Eagles of the International Energy Agency said: "The announcement of further production cuts is unwelcome, especially at a time when oil prices are high, supply risks are heightened and the peak of the winter heating season has begun."

"Due to the strength of the United States and Europe, it is impossible for OPEC to reduce its supply in winter. But China's right to speak is very limited." Zhao Yucheng said.

Saudi Arabia told U.S. buyers that it will maintain supply at a stable level in February.

Analysts believe that compared with the IEA, China’s strategic reserves are still weak. Only by OPEC cutting supply to China can the market be forced to respond in a more timely manner and the oil price rise to above $60/barrel as soon as possible.

Qiu Xiaofeng of Everbright Securities believes that once oil prices respond, exploration-focused companies such as PetroChina and CNOOC will benefit from it.