April 9, 2018 / 11:16 AM / a month ago

Sinopec to cut Saudi crude imports for May in response to high OSPs: official

NEW DELHI (Reuters) - China’s Sinopec, Asia’s largest refiner, plans to cut Saudi crude oil imports loading in May by 40 percent after oil company Saudi Aramco set higher-than-expected prices, an official from trading arm Unipec said.

The company logo of China’s Sinopec Corp is displayed at a news conference in Hong Kong, China March 26, 2018. REUTERS/Bobby Yip

“Our refineries think that these are unreasonable prices as they do not follow the pricing methodology,” the official, who declined to be named, said on Monday.

India’s Mangalore Refinery and Petrochemicals Ltd (MRPL) has also cut its annual oil import deal with Saudi Aramco by about 22 percent to 70,000 barrels per day, two company sources said, adding it would instead step up purchases from Iran like other state-run refiners.

Asian oil traders have struggled to understand how Saudi Arabia derived its official selling prices (OSPs) for May after the world’s top oil exporter unexpectedly raised the price for its flagship Arab Light crude sold to Asian refiners.

Separately, trading sources at two North Asian refineries said on Tuesday they each planned to reduce May orders from Saudi Arabia by 10 percent.

The sources, who declined to be named, said they would implement operational tolerances built into long-term supply contracts that allow adjustments in monthly crude deliveries according to changes in available supply or demand.

Saudi Aramco did not respond to a request seeking comment on Sinopec’s planned cuts.

The Chinese firm’s demand for May-loading crude will be lower than the previous month due to refinery maintenance and as one of China’s largest oil ports, Huangdao, could be shut for days from early June to accommodate a government meeting, a second company source said.

The port is one of only a few in Shandong, China’s main oil importing province, where Very Large Crude Carriers (VLCCs) carrying 2 million barrels of oil per trip can discharge oil to be pumped through pipelines for state and private refineries.

Reporting by Florence Tan; Additional reporting by Nidhi Verma and Promit Mukherjee in NEW DELHI and Rania El Gamal. Editing by Richard Pullin and Henning Gloystein

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