Kuwait requested that some Asian refiners reduce oil imports under their annual deals as the OPEC producer has ambitions to start full-scale operations at its Al Zour refinery in the second half of this year, Reuters reported this week citing unnamed sources.
The impact of the country’s lower supply could tighten greater Middle East supplies to Asia, and therefore affect support prices, particularly from the world’s top crude importer China, which is expected to rebound this year.
Kuwait’s crude oil price plunged by $3.79 during Thursday’s trading session to $75.49 per barrel, according to the state’s Kuwait News Agency (KUNA).
Kuwait Petroleum Corporation (KPC) informed some buyers that Kuwait Export Blend crude supply could be reduced under new annual contracts as soon as April, reported Reuters, informed by two Indian refiners and one Japanese refiner.
Indian Oil Corporation (IOC), the country’s leading refiner, is said to reduce its yearly oil purchase form Kuwait starting in April by about 20%, or 20,000 barrels per day (bpd).
IOC has increased its term crude volume with Iraq’s Oil Market Company (SOMO) by 20,000 bpd to make up for reduction in Kuwaiti oil, according to the wire news agency.
This would lift 210,000 bpd from Iraq in 2023, in comparison to 190,000 bpd in 2022, said one source.
A second source said Kuwait has reached out to his firm and asked them to take less oil under the next fiscal year’s term contract in April.
The Japanese refining source added that KPC has contacted other refineries in Japan to negotiate supply reductions, but did not disclose any numbers.
Waleed Al-Bader, chief executive of Kuwait Integrated Petroleum Industries Company, announced last week that the much-delayed Al Zour refinery has begun its second phase.
Currently at 615,000 bpd, the refinery has three crude oil distillation units of the same volume.
Fischer Global Energy, a leading global oil and gas, and LNG consultancy, expects a third crude distillation unit to operate at Al Zour by August.
Kuwait seeks to increase its oil exports with the goal of fulfilling Russian shortfalls in Europe amid Western-imposed sanctions and to meet growing demand in Asia and Africa, said Reuters in late February.
Kuwait has about 7% of global oil reserves, according to the International Trade Administration.
Oil makes up about half of Kuwait’s gross domestic product, and around 95% of its exports, in addition to 90% of government export revenue, as of 2022.