Saudi Arabia to Maintain Shipment Levels Despite Fall in Oil Prices

Despite a dive in prices to below $80 for the first time in a year, Saudi Arabia, will maintain shipments to key North Asian refiners unchanged next month.

While most refiners had expected the kingdom to keep their monthly supply allocations steady at full contractual volumes, the formal notice over the weekend follows last month's OPEC deal to trim output last month and growing anxiety among some members over the impact of the financial crisis on prices.

The $70 drop from a record high in July has caused some OPEC members to call for production cuts, and the group has agreed to hold an emergency meeting in Vienna on Nov 18, to discuss the impact of the global financial crisis on the oil market.

But for the moment, the group's most influential member appears to be holding fire. Allocations for global oil companies and European refiners will be known later in the day.

'The allocation was what everyone was expecting. We didn't expect them to trim (it), not just yet,' said one refiner. Two other Saudi customers confirmed the notice.

Sources at refiners in Japan, the kingdom's biggest customers in Asia, were not available due to a holiday.

Saudi Arabia also maintained its standard policy on operational tolerance limits, which allow the oil producer to vary contracted volumes by five percent either lower or higher, despite some talk that the Saudis might tighten those limits to to pare back supply discreetly, the lifters said.

On Monday, oil rose more than $3 to top $80 a barrel, recouping some losses in a relief rally as leaders in the United States and euro zone took steps to pull the banking sector away from a deeper collapse.

Author: Jo Amey