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Fri 10 Jul 2009 10:43 AM

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Saudi's overall crude supplies steady

Two big North Asian refiners to receive significantly less crude from Saudi Arabia - trade sources.

Saudi's overall crude supplies steady
STEADY SUPPLY: Supplies elsewhere in Asia, Europe, US are mostly steady.(Getty Images)

Leading exporter Saudi Arabia was expected to supply roughly steady volumes to many of its customers in August, although two big refiners would receive significantly less crude, trade sources said on Thursday.

Overall, supply in August from the world's top exporter was expected to stay at around 8 million barrels per day, slightly below its implied OPEC production target, trade sources said.

Two North Asian refiners, who are major lifters of Saudi crude, were informed of 30 percent and 20 percent cuts from fully contracted volumes for August -- the deepest curbs since OPEC began reducing supplies last September.

But, citing weak demand, one trader said its company had requested the lower volume.

"Compared with our long-term contract this year, the August allocation is around a 30 percent cut from contracted volumes," the source said.

"But because we require less volumes from Saudi now, what they give us is around the same as what we asked."

Most other Asian refiners would receive steady, slightly higher or slightly lower volumes from July, sources with 10 other refiners said.

Two sources added there had been no changes to operational tolerance for August supplies and the curbs were mainly in the heavier, lower quality grades.

In Europe, sources on Thursday said refineries were expecting roughly steady volumes, although one said that overall there could be "some rebalancing from West to East", reflecting insipid demand from the United States.

Several U.S. buyers also said on Monday that Saudi Arabia planned to keep oil shipments to the United States unchanged in August.

Since last September, the Organization of the Petroleum Exporting Countries has agreed to reduce output by 4.2 million barrels per day as demand for oil has shrunk.

At its highest, OPEC compliance with the agreed cuts, led by Saudi Arabia, reached around 80 percent, but since then has slipped to an estimated 72 percent.

Lower OPEC production helped to push oil prices to a 2009-high of $73.78 a barrel on June 30, but they have since fallen to around $61 a barrel.

Saudi Arabia has signed contracts to export up to 3.38 million barrels per day (bpd) to Asia this year, but has until this month curbed sales by up to 15 percent to some customers.

Sources with several refiners said they had yet to be notified of their August term volumes.

Most other refiners in Asia received cuts believed to be ranging from 6 percent to 15 percent, steady compared with July, or slightly lighter.

Three refiners said they would receive full term volumes, two because their contracts were for small volumes and they do not get cuts every month, and the other because it would lift only light grades.

Against the backdrop of subdued demand and weak prices, refining margins have narrowed and simple refineries in Asia have been among the hardest hit.

At Asian topping units, margins have turned negative since June, with the last two-week average showing refiners turning a 45-cent a barrel loss if running benchmark Dubai crude.

Margins at complex refineries remained positive but at a weak $2.43 a barrel of the past 15 days, almost half the last 365-day average, according to Reuters data.

Abu Dhabi National Oil Co, the main oil producer in OPEC-member the United Arab Emirates, also announced slightly deeper curbs for August, widening the supply cuts for its Asian customers to 19 percent from 18 percent for July, trade sources said in late June.

But Qatar announced full term supplies for August, after curbs in July that appeared to be more related to a short-term production problem than to compliance with OPEC curbs. (Reuters)

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