Saudi Arabia is having serious problems finding buyers for the extra oil it is going to pump into the global markets in the coming months as customers cancel or delay orders mainly because of falling demand for refined products and surging transportation prices, shows a report.
The Reuters news agency said in its report that major oil companies around the world had already cancelled orders for extra Saudi oil in April and May after Riyadh disagreed to pay rebates on freight under default contract terms.
That means that Saudi Arabia is now struggling to find customers for the millions of barrels of oil it was planning to pump into the markets each day.
Earlier this month, the Saudis decided to supply oil at a major discount in the coming months after they failed to convince rival producer Russia to agree to new cuts to production.
The move caused a significant fall in global oil prices and prompted customers to place orders for extra Saudi crude.
However, Reuters’ report said that many of those customers, including Royal Dutch Shell, Finland’s Neste, US and Polish refiners and Unipec, the trading arm of Asia’s largest refiner Sinopec in China, were taking less Saudi crude.
It said Indian refiners had also asked the Saudis to delay shipments planned for the coming months.
Saudi Arabia’s state-run Aramco, the world’s largest oil company, has been directed by the Kingdom to keep supplying crude at an all-time high of 12.3 million barrels per day (bpd) until the end of May and then add another 10 million bpd to the production.
Cancelling orders for extra Saudi oil comes as many refiners face tumbling demands as a result of the new coronavirus pandemic which has seriously affected the global markets.