Saudi Arabia to slash gasoline imports by 29% in June

GASOLINE IMPORTS: Saudis set to slash imports as domestic production capacity is ramped up. (Getty Images)

Saudi Arabia is expected to slash gasoline imports by nearly 29 percent in June, as domestic production capacity ramps up following refinery maintenance work, traders said on Monday.

The world's top oil exporter will import nearly 57,000 barrels per day of gasoline in June versus 80,000 bpd in May, traders said.

Saudi Arabia typically imports between 60,000 to 70,000 bpd each month, traders said, but the OPEC member had raised imports in recent months due to an outage at a 44,000 bpd hydrocracking unit at its largest refinery in Ras Tanura and planned maintenance work at its 120,000 bpd Riyadh refinery.

Aramco restarted the Riyadh refinery recently following a 39 day shutdown, while the hydrocracking unit at Ras Tanura is expected to come back online in June, traders said.

"Clearly the fact that they are coming out of some refining work is going to help boost domestic production, so they will require less from the export market," a Middle East based trader said.

"We could see this drop further once the Rabigh project is running fully online."

The kingdom, which heavily subsidises fuel sold to domestic retailers, would likely cut imports of gasoline further once its joint venture project Rabigh Refining and Petrochemical Co (PetroRabigh) gets up and running at full capacity.

Gasoline production from the joint-venture integrated facility was expected to be about 60,000 bpd, which would serve domestic consumption requirements, PFC Energy said.

The refinery moved its first shipment of refined oil products to China on Monday, the company said.

Burgeoning inventories of gasoline in Saudi Arabia - forcing as much as 1.5 million barrels into seaborne storage - could also weigh on imports.

Shipping and trading sources said onshore storage was almost at capacity as Saudi Arabia had been taking advantage of weak global prices in recent months to build up its inventories.

Mediterranean suppliers are expected to feel the pinch beginning in June when the kingdom cuts back on their gasoline imports.

The region supplies about one third of Saudi's gasoline import requirements monthly, traders said.

"Saudi is going to be buying less gasoline from the Med over the next few months... it will still be a supply option for them, but it won't be so much of a factor as in the past," a trader said.

Suppliers in the Mediterranean are expected to push more of their supplies to the United States as prices run up ahead of the summer driving season when demand for gasoline hits its peak.

"The arbitrage has been favouring exports to the Middle East in general," a Meditteranean based trader said. "But with summer driving season coming up, we're expecting to start pushing more gasoline into the US, as we see the arb improving there."

US gasoline prices for the June contract rose to almost $1.75 a gallon on Monday, the highest since late October. Prices are up more than 20 cents from average price in April. (Reuters)

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