State oil company Saudi Aramco will cut crude oil allocations to its customers worldwide in September by at least 520,000 barrels per day (bpd), an industry source familiar with the matter told Reuters on Tuesday.
The cuts in allocations are in line with Saudi Arabia's commitments with the OPEC-led supply reduction pact, under which the top oil exporter is required to cut 486,000 bpd.
Saudi Arabia will cut supplies to most buyers in Asia by up to 10 percent in September, multiple sources with knowledge of the matter have said.
"The Saudi decision to take an ax to its Asian crude allocations shows it means business (and) gives credence to its pledge to do 'whatever it takes' to normalize bulging global oil inventories," PVM oil analyst, Stephen Brennock, told CNBC on Tuesday.
Brennock argued Asian buyers would soon be forced to become increasingly reliant on producers in the Atlantic Basin in order to meet their crude oil requirements.
He also suggested that Russia would most likely gain further market share from Saudi Arabia as a result of the Middle Eastern country's self-imposed cut to crude oil allocations.
"(While) it helps to lift sentiment in the short term, there's no guarantee of long-term price support as other oil exporters including Russia, the U.S. and Iran rush to fill the shortfall," Brennock said.
Benchmark Brent crude was trading marginally higher at $52.35 a barrel at 2.00 p.m. London time, while U.S. light crude was up 0.1 percent at $49.45.
"It makes perfect sense … Clearly Saudi Arabia is showing everybody that they are willing to be at the forefront of supporting oil prices," Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, told CNBC via telephone on Tuesday.
Hansen explained that while the country's decision could be perceived as a risk – given that other countries may now look to increase their market share – it also showed a willingness to sustain positive momentum.
"They are just trying to keep the ball rolling in what is clearly a critical quarter for OPEC," he added.
The news of Saudi Arabia's decision emerged ahead of a joint OPEC and non-OPEC technical committee meeting in Abu Dhabi on Tuesday. Officials are expected to discuss ways to bolster compliance among those producers committed to cut 1.8 million b/d in production.
"The real key here is that they are swinging the cuts more towards Asia," Sam Alderson, analyst at Energy Aspects, told CNBC on Tuesday.
"With the allocation cuts reportedly focused on the lighter grades such as Arab Light and Arab Extra Light, the impact could have a clearer impact on benchmark grades in the west as Asian buyers look to spot cargoes out of the Atlantic Basin and U.S. to ease any shortfall," Alderson added.
OPEC output had hit a 2017-high in July with exports at record levels.