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Full Oil Supply to Saudi Customers, No Extra

Source: Reuters 3/12/2012, Location: Middle East

Saudi Arabia, the world's top crude exporter, will supply full contracted volumes of crude oil in April to at least one Asian and another European term buyers as it did in March, trade and industry sources familiar with the matter said. The monthly supply notification from Saudi Arabia has been in the market focus particularly in the recent months due to increasing concerns about the oil supply from Iran under Western sanctions.

"We have 100 percent of what we have as the contract volume," one trader said. "They keep supplying the same volume as before."

One international oil major would receive its full contacted volume, one of the sources said.

Saudi Arabia sells its crude oil exclusively to end-users with term contracts while it gives buyers the option of tolerance, with which buyers can ask for cargoes to be loaded with up to 10 percent more or less crude than contracted.

Particularly to Asian buyers, the move was expected as the OPEC kingpin has supplied full contractual volumes to most Asian buyers since late 2009.

Ahead of the EU embargo on Iranian crude imports will become effective in July 1, Iran has cut off supplies to some European countries, which altogether bought about 700,000 barrels of Iranian crude per day late last year. Iran's top European buyers have been seeking more from Iraq, Libya and Russia but Saudi Arabia is the only country that holds significant volumes of spare capacity.

One buyer, which holds term contracts with Iran and Saudi Arabia, said the company has not been affected by the cut off.

"They (Saudi Arabia) always supply the same volume and never offered spot cargoes to us. We keep lifting oil from Iran until July 1 because it is still legal," the source said.

As the West refreshes the wave of sanctions against Iran due to its nuclear ambitions some Asian oil companies have said they would cut back crude oil purchase from Iran.

One Asian buyer does not plan to immediately take additional volumes from Saudi Arabia to compensate for possible disruptions to oil from Iran, another of its suppliers, one of the sources said.

The source added that the firm would consider options such as buying in the spot market.

A second Asian buyer also received its allocations, but the details were not disclosed.

Saudi Arabia supplied 9.4 million barrels per day (bpd) of crude to the market in February steady from January, an industry source familiar with the matter told Reuters.

"Production from the kingdom was in the range of 9.85 million bpd also steady from the previous month," the industry source added.

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