Saudi Arabia will maintain steady oil supplies to major Asian buyers in March, industry sources said on Monday, suggesting the world's top oil exporter may be pausing its production cuts to see if prices stabilise.
After deepening supply curbs to Asian refiners every month since December in a bid to halt oil's precipitous slide, state oil firm Saudi Aramco notified its big customers in Asia at the weekend that shipments in March would be largely unchanged, trade sources with three refiners in Japan and South Korea said.
The sources told Reuters they would receive about 7 to 10 per cent below normal contractual supplies next month, the same as February. A fourth said the company would receive a marginally deeper 10 per cent cut versus 9 per cent.
All sources declined to be identified because the information is confidential.
The broadly steady supplies came as a mild surprise to many in Asia, who were bracing for a fourth successive reduction as Riyadh leads Opec's efforts to put a floor under oil prices, which languished around $40 a barrel on Monday.
While Opec has not agreed on any further supply cuts since January 1, many traders had speculated that the kingdom might act alone to tighten the taps even more, as it has several times in recent months, especially with growing signs that Opec could make another formal production cut when it meets on March 15.
"We were thinking we may get a little deeper cut," said a source with a refiner.
While crude remains far below the $70-$80 range that many in Opec have identified as ideal, the market has shown signs of bottoming out over the last two months, bouncing between $30 and $50 a barrel. March crude edged up 9 cents to $40.26.
That stability comes as Opec makes good on its pledge to cut supply by a total 4.2 million barrels per day (bpd), or 5 per cent, in order to offset contracting demand, a drive led by Saudi Arabia, which is planning to pump in February below its formal Opec target of 8.05 million bpd.
Opec's president told Reuters this month that the group could cut supply further next month, just ahead of the second-quarter seasonal demand slowdown, but Monday's news suggested to some analysts that a wait-and-see approach might be taking hold.
"Opec and Saudi have followed through (with the agreed supply cuts)," said Jonathan Kornafel, Asia director of US-based Hudson Capital Energy. "They're taking a step back and seeing how it affects the market."
"The Opec cuts, combined with hopes in stimulus plans... is keeping a floor in the market. We're not seeing the $75 a barrel that Opec wants, but we're not dropping further."
Saudi Arabia's announcement came two weeks after fellow Opec producers, the United Arab Emirates and Qatar, notified Asian lifters of March supplies.
The UAE's state oil company gave refiners slightly more of its flagship Murban grade, while small producer Qatar deepened supply cuts to its main Marine crude.
Two buyers said that supply curbs of cheaper, heavier crudes were deeper than the more expensive lighter grades, a trend that was also seen for February allocations.
On the physical side, with Japanese refiners heading toward the weak second quarter with still high inventory levels, analysts saw few signs of a quick turnaround.
"There are not many inquiries for crudes now, so the impact to the market is limited," said Osamu Fujisawa, an oil economist at industry consultants FE Associates.
A fifth Asian buyer that saw its supplies cut by 14-15 per cent in February said it had still not received a Saudi notice for March yet.