The world is drowning in excess Heavy/Sour crude oil that nobody wants to buy.
SAUDI ARABIA SELLING OIL AT DISCOUNT
September 18, 2005, 11:55
finfacts.com
The Saudi Arabian oil minister said at his press briefing in Vienna that he doesn't see more demand for his crude oil. Saudi Arabia is now pumping about 9.5 million barrels a day.
``We have offered up to 11 million barrels, but we have had no response whatsoever,'' al-Naimi said. There is ``absolutely not'' demand for more oil from Saudi Arabia.
With one-fourth of the world's proven oil reserves and some of the lowest production costs, Saudi Arabia is likely to remain the world's largest net oil exporter for the foreseeable future. During January-May 2005, Saudi Arabia supplied the United States with 1.5 million barrels per day of crude oil, or 15%, of U.S. crude oil imports during that period.
Saudi Aramco, the State oil company, has been forced to offer ever-greater discounts to tempt refiners to buy its product, which is shunned because of its high sulfur content.
The official selling price for Saudi oil for October delivery is currently set at a discount of more than $13 per barrel to US light crude which on Friday was priced on the New York Mercantile Exchange at $63 per barrel.
Refiners seeking to make high specification petrol and diesel are reported to prefer low-sulfur crudes such as Brent or Nigeria’s Bonny Light.
Few refineries are able to convert more of the heavy sulfurous “sour” crudes into petrol and most of those are in the United States. The damage caused by Hurricane Katrina has forced refiners to turn to light North Sea and US crude blends which are already in diminishing supply.
Crown Prince Sultan bin Abdul Aziz of Saudi Arabia said earlier this week that the recent rise in the oil price resulted from a shortage of refining capacity. He repeated the Kingdom’s commitment to keep the market well supplied with crude but said: “The current rise in oil prices does not stem from a shortage in crude oil supplies but is due to, as everyone knows, increased demand for products and a shortage in refining capacity.”
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