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Saudi-Kuwait Field Halt May Curb Supply to Asia

Source: Reuters 10/20/2014, Location: Middle East

A production halt at an oilfield run jointly by Saudi Arabia and Kuwait is expected to curb crude supply to Asian buyers - mainly Japanese and South Korean refiners - likely forcing them to turn to the Middle East spot market, traders said.

Saudi Arabia and Kuwait have temporarily stopped production from the Khafji oilfield to comply with environmental rules, according to an industry source familiar with Saudi policy and an internal letter seen by Reuters.

Saudi Arabia is expected to offer other grades to term buyers to replace Khafji, but Kuwait Petroleum Company (KPC) does not have excess oil to supply, traders said. KPC could not be immediately reached for comment.

Buyers may turn to the spot market to procure similar crude as replacement which could strengthen spot differentials for grades such as Banoco Arab Medium, they said.

Last week, at least two cargoes of Banoco Arab Medium for December loading traded at 5 cents discount to parity to its official selling price (OSP), traders said.

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