Saudi Arabia is the world’s largest oil exporter and it has reportedly notified some refineries in Asia that it will be supplying full contractual volumes of crude in May. As the oil market is currently undergoing historic shock that is abrupt, extreme and at a global scale, the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia also agreed to reduce production by 9.7 million barrels per day (bpd) in May and June. As per reports, the production cut is aimed to contribute to the efforts at stabilising the market.
While speaking to Reuters, the three sources who have the knowledge of the matter said that there is no change in the volume of oil supplied as the state oil giant, Saudi Aramco has altered the ratio among its crude grades by increasing Arab Light quantities and reducing those of Arab Heavy. In a bid to provide oil to the Asian countries, Saudi Aramco has also reportedly made deep price reductions for crude in May as the fuel demand and complex refining margins in Singapore slumped.
In its monthly market report, OPEC said that the ramifications of COVID-19 response resulted in ‘unprecedented’ worldwide oil demand shock. The organisation said that the demand shock led to massive sell-offs in the global oil market amid a significant crude surplus.
According to the report, the world oil demand growth forecast for 2020 has been revised lower by 6.9 million barrel per day to a historical drop of around 6.8 million barrel per day. Similarly, the non-OPEC oil supply is forecast to decline by 1.50 million barrel per day, a downward revision of 3.26 million barrel per day from the previous projection.
Meanwhile, earlier this month, the 9.7 million bpd deal was agreed by all participants after there was a deadlock because of Mexico not giving consent to an earlier deal which proposed a 10 million barrel per day. As per the agreement, 9.7 million barrel per day production cut will come into effect from May 1 and will continue for an initial period of two months ending June 30. For the next six months, the total adjustment agreed will be 7.7 million barrel per day output cut which will be followed by a 5.8 million barrel per day production cut for a period of 16 months.