Saudi Aramco informed the Egyptian General Petroleum Corporation (EGPC), Egypt’s state oil company, in early October that it would halt the supply of refined oil products to Egypt, Reuters cited a government official, according to Asharq Al-Awsat.
The official said, without giving a timeline for the suspension or a reason, “Aramco informed the EGPC early this month of its inability to supply Egypt with shipments of petroleum products.”
During a state visit this year by Saudi Arabia’s King Salman, the kingdom agreed to provide Egypt with 700,000 tonnes of refined oil products per month for five years under a $23 billion deal signed between Saudi Aramco and the Egyptian General Petroleum Corporation (EGPC).
Last week, Reuters reported that Egypt had not received October allocations of petroleum aid from Saudi Arabia, forcing its state oil buyer to rapidly increase tenders even amid a severe dollar shortage and growing arrears to oil producers.
The EGPC plans to allocate more than $500 million to purchase petroleum products and Egypt plans to launch some tenders to buy fuel needed for local consumption.
In recent weeks before Aramco announcement, there were indications that suggested a protracted delay or suspension of Saudi Aramco products as EGPC has re-entered the spot market to fill the gap.
Traders said, EGPC was announcing its largest purchase tenders in months, including calls for some 560,000 tonnes of gas oil for October arrival, a steep rise from the roughly 200,000 tonnes sought in September.
The oil aid provided by Saudi Arabia has saved Egypt hundreds of millions of dollars per month at a time when it faces a sharp shortage of hard currency that has forced it to ration dollars for key commodities and negotiate long term credit arrangements with oil producers to keep critical supplies flowing.
Moreover, other grants provided by the kingdom have been a mainstay in helping Egypt shore up its foreign reserves, which the central bank governor has said need to top $25 billion from their end-September total of $19.6 billion before the country can float its currency.