Apr 13, 2017 02:19 PM EDT
Buyers in the world's biggest oil market are finding they can almost always get what they want, at a time when they weren't expected to get what they need.
Saudi Arabia, which is cutting output as part of a deal to ease a global glut, was said to supply customers in Asia with all the oil they sought for May, keeping with its strategy of largely sparing them from the curbs. Meanwhile, U.S. exports have surged to nations including China and South Korea while refiners in the region are also binging on African and European North Sea crude.
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This free flow of oil signals the high value placed by producers on sales to Asia, which is the center of global demand growth. When the Organization of Petroleum Exporting Countries and its allies began implementing their output-cut agreement in January, regional buyers were concerned about losing access to the wide array of cargoes that were available over the past three years amid a global glut. Instead, the reductions have largely affected refiners in the Americas and Europe.
"There's no shortage of crude for refiners in Asia," said Peter Lee, a Singapore-based analyst at BMI Research. "Asia remains the single largest oil-importing region globally, and producers in the Middle East are prioritizing their sales to the region over European and U.S. markets even as the OPEC and non-OPEC producers' pact remains in place."
What's more, the cuts have made supply from nations not part of the deal such as the U.S. more affordable. "Flows of oil from West Africa, the U.S. and North Sea are cost-competitive against Middle Eastern grades as OPEC, non-OPEC compliance to the supply cut has made Middle Eastern barrels more expensive," said Lee.
Please read the rest of the article from Bloomberg here.