(Bloomberg) -- As impending U.S. sanctions squeeze Iranian oil supplies, top OPEC member Saudi Arabia is changing its own crude diet to meet customer demand for alternative cargoes.

The trading arm of state-run producer Saudi Aramco is said to be offering an ultra-light oil known as Khuff condensate, a rarely traded grade that’s typically processed in the nation’s domestic refineries. To free up this more valuable supply for export, the Middle East country is diverting its Extra Light crude to units that split it into raw materials for petrochemicals and fuels.

Saudi Khuff supplies are entering the market at a time of growing demand for condensate, as operators of purpose-built splitters in countries such as South Korea and Japan scramble for alternative feedstock following a halt in purchases of Iran’s South Pars variety. The countries have turned to cargoes from Norway and the U.S., as well as the oil-product known as naphtha, to make up for the shortfall.

Spot supplies of Khuff are valued at about $2 a barrel over the official selling price for Arab Extra Light crude for the month of October, according to a Bloomberg survey of three traders who participate in the market. Unlike crude exports from the kingdom, condensates can be traded in the spot market and come without destination restrictions.

While Aramco sells most of its output via long-term contracts, its trading unit is increasingly leveraging the parent’s global network in procurement and refining. It’s dealing in non-Saudi crude, and made a sale of U.S. Mars oil to Taiwan’s Formosa Petrochemical Corp. in July this year. It’s also leaning on domestic refining operations to absorb restricted barrels in order to cash in on demand for more valuable and freely traded grades.

Its strategy is playing out just as the Organization of Petroleum Exporting Countries rebuffs demands from U.S. President Donald Trump that it take action to reduce prices. The group and its allies signaled less urgency and stopped short of promising specific extra volumes of crude, saying output would be boosted only if customers requested it.

To contact the reporter on this story: Serene Cheong in Singapore at scheong20@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Ovais Subhani

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