Top oil exporter Saudi Arabia on Sunday cut the February price of its flagship Arab Light crude to Asian customers to the lowest level in 27 months, a company statement showed, amid competition from rival suppliers and concerns about supply overhang.
Saudi Aramco slashed the official selling price (OSP) for February-loading Arab Light to Asia by $2 a barrel from January to $1.50 a barrel over Oman/Dubai quotes, a level last seen for November 2021.
The price cut, the biggest in 13 months, is in line with market expectations, as refiners called for competitive prices from Saudi Arabia comparing to crude oil supplied from other Middle Eastern producers and the arbitrage cargoes from the Atlantic Basin.
“Saudi crude is still relatively more expensive compared to other regional crude. But we are happy enough to see such prices, making it much more affordable for us,” said a trader with a North Asian refinery.
The Asian physical oil market softened over the past month, reflecting expectations of less supply tightness in the near term and weaker demand as some Asian refineries are scheduled to shut down for maintenance in the spring season of the northern hemisphere.
Despite a combined voluntary output cut of 2.2 million barrels per day by the OPEC+ group of oil producers, market participants are not convinced the supply reduction will be enough to stop a build-up in global oil inventories and to fuel an oil price rally until at least the second quarter of 2024.
Saudi Aramco also trimmed prices for other crude grades it sells to Asia by $2 a barrel in February from the previous months, the statement showed.
For other regions, Saudi Aramco cut its February Arab Light OSP to northwest Europe by $2 a barrel to $0.90 a barrel above ICE Brent.
The OSP of Arab Light to the United States was lowered by $2 a barrel to $5.15 versus ASCI in February.