Tokyo — Saudi Aramco has informed at least one Japanese refiner that it will reduce the refiner's June-loading crude allocations by 20%-40%, a source at the Japanese refiner told S&P Global Platts.
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"We had cuts across grades, with larger cuts in heavier grades," the source said, adding that the company is slightly concerned of the possibility of an uptick in domestic demand following the partial lifting of Japan's state of emergency on Thursday.
Japan on Thursday lifted the state of emergency measures imposed to curb the spread of COVID-19 in 39 out of 47 prefectures, with a planned follow-up review on May 21 to possibly lift additional measures for Tokyo, Osaka and six other prefectures, prior to the May 31 expiry.
Platts reported on April 27 that in June, Japan could see roughly 13 million barrels of surplus crude over domestic demand amid plummeting petroleum consumption due to the coronavirus pandemic, pressuring refiners to delay some of their term supply after June.
Japan's surplus crude could amount to around 440,000 b/d in June, based on its imports a year ago, even if local refiners took less monthly term supply volumes from a combination of supply cuts and contractual tolerance, in addition to reducing spot procurement because of plummeting domestic oil demand, according to Platts calculations.
The calculations are based on the assumption that Japanese refiners will cut their term supply from some of their key Middle East suppliers by 5%-15% as well as scale back spot crude procurement for June.
Aramco's allocation cuts for Japan came to light days after Saudi Arabia said it will voluntarily cut an additional 1 million b/d of its crude oil output in June, over and above its quota as per the OPEC+ agreement, and hold its output at 7.492 million b/d.
The Saudi energy ministry had directed state oil company Aramco to make the extra cut, which will amount to 4.8 million b/d from its April production level, the official Saudi Press Agency reported on Monday, citing an unnamed ministry official.
Saudi Arabia's quota under an OPEC-led global supply accord eases to 8.993 million b/d for the second half of 2020. The pact commits OPEC and 10 other countries to significant production cuts to reverse the market slide caused by the coronavirus pandemic.