Saudi Aramco to Cut January Oil Supplies to Japan

By Shigeru Sato and Yuji Okada

Dec. 8 (Bloomberg) -- Saudi Aramco, the world’s biggest state oil company, will reduce crude supplies to Japan in January for the second month as global demand for fuel slumps.

The Dhahran, Saudi Arabia-based producer will cut shipments to Japanese refiners including Nippon Oil Corp., Idemitsu Kosan Co. and Cosmo Oil Co. by 7 to 10 percent from levels agreed under annual contracts, said officials at two refineries who received notices today from the company. They asked not to be identified because of confidentiality agreements.

“The kingdom’s cuts in January-loading volume mean that there’s a supply glut in the global oil market,” Ken Hasegawa, Tokyo-based commodity derivatives sales manager at Newedge Group, said by telephone. “This also indicates that OPEC will most likely announce a substantial reduction next week.”

Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said there was consensus for a significant production cut, the Associated Press reported, citing an interview. The cartel agreed on Oct. 24 to slash output by 1.5 million barrels a day, the first cut in two years, after global demand fell.

Consumers and industrial users in Japan, the world’s third- largest oil consumer, are delaying fuel purchases because they expect prices will drop in line with the declining trend of crude oil futures. Demand, already weak in Japan, has been damped further by the recession as many factories cut operating rates and shipping lines cut container services.

Saudi Aramco cut supplies to Japanese refiners by 5 to 6 percent in December, refinery officials said last month.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.