Saudi Arabia slashed the official selling prices (OSPs) for its oil exports to Asia in October more than expected in a move seen as the world’s largest crude exporter trying to keep and boost its market share while Asian fuel demand is recovering from a dip in recent weeks.
Saudi Aramco lowered its OSPs for the Asian markets for all the grades it sells. The cuts, the first in three months, range from $1.00 to $1.30 a barrel. Arab Light, the flagship crude grade of the Kingdom, will be selling in Asia at a $1.70 a barrel premium over the Oman/Dubai benchmark in October, after a massive $1.30 cut from the September price of $3.00 above Oman/Dubai, off which Middle Eastern exporters price their crude bound for Asia.
The pricing of Saudi crude oil generally sets the trend for the pricing for Asia of other Gulf oil producers such as the United Arab Emirates (UAE), Kuwait, Iraq, and Iran. The pricing of Saudi Aramco affects as much as 12 million barrels per day (bpd) of Middle Eastern crude grades going to Asia.
The Saudis left the prices for the United States and Europe unchanged from September and slightly cut the prices for the Mediterranean region, by $0.10 for all grades loading in October, according to a price list Reuters has compiled.
Last month, Saudi Arabia had raised the prices for crude oil loading for Asia in September in a widely expected move tracking stronger Middle East oil benchmarks.
This month’s price hike for Asia, however, took traders by surprise early on Monday, when oil prices were losing more than 1 percent as some participants interpreted the deep cuts as a sign that Saudi Arabia is concerned about demand in Asia.
Others believe that the aggressive price cuts are a move to win back Asian customers who, spooked by the recent high OSPs in long-term contracts—under which the Saudis sell all their oil—have turned to the spot market and to other countries for cheaper crude supply.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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