Saudi Arabia will supply the full contractual volumes to at least three customers in North Asia, sources familiar with refiners’ allocations from the world’s top crude oil exporter told Reuters on Monday.
Last week, as widely expected, Saudi Arabia’s oil giant Aramco slashed the price of its flagship grade to Asia for October amid lackluster fuel demand and increased competition from crude from other regions. This was the first cut in Saudi official selling prices (OSPs) to its key export region, Asia, in four months.
Asian refiners were expecting a large cut in Saudi prices, many due to two reasons. The first one is the fear that demand would not be strong with concerns of economic slowdown and flash Covid lockdowns in China as part of the “zero Covid” policy. The other one is the narrowing spread between Dubai-linked and Brent-linked cargoes, which has curbed demand for cargoes linked to the Dubai benchmark, off which Middle Eastern crudes are priced for loadings to Asia.
Aramco cut the prices of its Arab Light crude grade to Asia by $3.95 per barrel for October, and to European buyers by $2 a barrel, while prices for U.S. buyers saw no change, with the exception of heavier and lighter variants that will see a $0.50 per barrel increase.
The price cuts come after record high prices in September for Arab Light, which reached $9.80 per barrel over the Oman/Dubai benchmark, while Arab Extra Light is selling for $10.95 per barrel over the Middle Eastern benchmarks this month. With the price cuts, Asian buyers for October will pay $5.85 per barrel for Arab Light above the Oman/Dubai benchmark.
The price cut from Saudi Arabia for October also came shortly after Russia announced it would increase shipments of oil to Asia in response to the G7’s plan to implement a price cap on Russian oil beginning on December 5th, when the European Union ban on Russian seaborne oil goes into effect.