Crude oil buyers in Asia are concerned that an unexpected cancellation of an OPEC+ meeting to discuss a rise in output could drive oil prices even higher and hurt their margins.
They are now awaiting Saudi Arabia’s official selling prices (OSPs), which were delayed until after the OPEC+ meeting and set the tone for prices of a majority of Middle East crude sales to Asia, to assess the oil market’s direction.
“That could force them to cut runs, which should lift margins again and bolster their crude oil buying,” the source added. China is the world’s second largest oil consumer and top overall importer.
The talks were canceled following a clash between top producer Saudi Arabia, which wants to maintain output curbs, and the United Arab Emirates, which has pushed for increased output.
No date has been set for the next OPEC+ meeting, which has left some sources speculating there would be no output increase in August while others expect the group to convene a new meeting within days in order to secure an agreement.
“Buyers would like prices to be reasonable and early release of additional barrels will help us … this is more of a temporary phenomenon and would settle eventually,” a source with an Indian refiner said.
For now, Asia’s physical crude market remains adequately supplied even as global fuel demand gradually recovers from the coronavirus pandemic, refining sources said. Asia is the top oil consuming region, accounting for roughly 37% of world use.
The near-term impact on Asia’s physical market would only be marginal even if OPEC+ had agreed to increase volume, because the proposed output rise appeared to be only 400,000 barrels a day, said a source with a Japanese refiner.
In the absence of clarity, end users are now closely monitoring the release of OSPs from Saudi Aramco for clearer signals on the direction of the physical market.
Saudi crude OSPs, which are typically released around the fifth day of each month, have been delayed due to the breakdown of OPEC+ talks, the sources said.
Saudi OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affect more than 12 million barrels per day (bpd) of crude bound for Asia.
“The fact that Saudi OSPs still have not been released means that Saudi is still making efforts for talks with ADNOC. The Saudis normally wait till the market becomes clear before they announce the OSPs,” said the source at a North Asia refinery.
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