UPDATE 1-Saudi cuts Sept crude supplies to most Asian buyers by up to 10 pct - sources

SINGAPORE/TOKYO - 8 August 2017:The world's top crude oil exporter Saudi Arabia will cut supplies to most buyers in Asia by up to 10 percent in September to comply with a producers' deal to cut output, multiple sources with knowledge of the matter said on Tuesday.

Of the seven refineries surveyed by Reuters, four received their first supply cuts since the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers, including Russia, agreed to cut output in November.

Saudi oil supplies to China will be mostly cut by between 5 percent to 10 percent, one of the sources said, even though one buyer said it is receiving full allocation and another said its cut was smaller than 5 percent.

Supplies to southeast Asia and India will drop by 1 million barrels from contracted volumes in September, another source said.

The wider Saudi cuts come as doubts have emerged about the effectiveness of the producers' agreement. OPEC output hit a 2017 high in July and exports rose to a record, prompting producers to examine whether the deal should focus on exports.

State oil giant Saudi Aramco has been cutting supplies to the United States and Europe, but has met most of the crude demand in Asia in order to protect market share in the world's fastest growing demand region.

"It is still keen to keep its Asia market share," said a senior crude trader who declined to be named due to company policy.

"Saudi is expected to maintain cuts to the United States as its strategy to draw down U.S. inventories has been successful."

Saudi Arabia's supply cuts to Asia could lift sentiment in the Middle East crude market as refiners may turn to spot supplies to make up for the Saudi shortfall just when arbitrage flows from the Atlantic Basin are expected to tighten.

"This may support Middle East spot crude," said an Asian refinery source.

Most of the Saudi cuts were in light grades such as Arab Light and Arab Extra Light, the sources said, while the producer maintained or in some cases gave more Arab Medium and Heavy crude supplies to make up for the light crude shortfall.

The move could ease the global tightness in heavy crude after OPEC producers focused on cutting output of the cheaper but more expensive to produce heavy oil to comply with the agreement.