Saudis cut oil prices to woo buyers as OPEC+ boosts supply
By Administrator_ India
Saudi Arabia cut oil prices for sales to Asia next month by more than twice the expected amount in a sign the world’s largest crude exporter wants to entice buyers to take more of its barrels.
State producer Saudi Aramco is rolling back pricing on all of its grades to its biggest market in Asia. Three successive months of increases in the company’s official selling prices had left refiners smarting as the coronavirus pandemic plays havoc with the recovery in energy demand.
But with Brent crude up 40% this year, OPEC+ sees enough demand — and a potential shortage by the end of the year — to allow it to raise production. That increase means more barrels competing for cautious buyers. Saudi Arabia, which sells all of its oil on long-term contracts to refiners, risks alienating customers if it sets monthly prices too high.
Aramco is lowering pricing for Arab Light crude, its main oil grade, by $1.30 a barrel to a premium of $1.70 more than the regional benchmark, according to a statement. Aramco had been expected to reduce the oil selling price of the grade by around 60 cents a barrel, according to a survey of six traders and refiners in Asia last week.
Refiners in Asia, who are Aramco’s biggest customers were surprised by the scale of the cuts. The reductions signal the Saudis are trying to compete on price with other producers and to grab market share from rivals, according to the buyers.
Those refiners have suffered as swings in demand crimp profits from turning crude into fuels like gasoline and diesel. Saudi Arabia spends more than 60% of its crude exports to Asia, with China, South Korea, Japan, and India the biggest buyers.
Aramco is keeping pricing to the U.S. and to Northwest Europe unchanged for October. For buyers in the Mediterranean region, Aramco is trimming pricing on all grades by 10 cents a barrel.
Aramco isn’t looking to increase sales in the U.S. as that country draws on strategic reserves, Staunovo said. Refinery capacity on the U.S. Gulf Coast is shut in after Hurricane Ida ravaged the area.
OPEC+ this month decided to continue rolling back supply cuts implemented last year to support prices as the coronavirus slashed demand. Led by Saudi Arabia and Russia, the Organization of Petroleum Exporting Countries and partners are moving cautiously to get oil back onto the market amid continued flare-ups of the virus that are slowing economic recovery.