Saudi Aramco announced reduction in Arab Light crude for Asian customers

 

Riyadh, January 8, 2024: Saudi Arabia, the leading oil exporter, announced on Sunday a reduction in the February price of its flagship Arab Light crude for Asian customers, marking the lowest level in 27 months, as indicated in an official statement. The move is seen as a response to increased competition from rival suppliers and concerns about a supply overhang in the market.

 
Saudi Aramco (2223.SE) implemented a substantial cut in the official selling price (OSP) for February-loading Arab Light to Asia, reducing it by $2 per barrel from January to $1.50 per barrel over Oman/Dubai quotes. This level was last observed in November 2021 and represents the most significant price reduction in the past 13 months.
 
The adjustment aligns with market expectations, with refineries expressing the need for competitive pricing from Saudi Arabia in comparison to crude oil sourced from other Middle Eastern producers and arbitrage cargoes from the Atlantic Basin.
 
A trader from a North Asian refinery remarked, "Saudi crude is still relatively more expensive compared to other regional crude. But we are content to see such prices, making it much more affordable for us."
 
The softening of the Asian physical oil market in the past month is reflective of anticipated reduced supply tightness in the near term and weaker demand, as certain Asian refineries are scheduled for maintenance shutdowns in the spring season of the northern hemisphere.
 
Despite the combined voluntary output cut of 2.2 million barrels per day by the OPEC+ group of oil producers, market participants remain skeptical that the supply reduction will be sufficient to curb the build-up in global oil inventories and stimulate an oil price rally, at least until the second quarter of 2024.
 
In addition to the reduction in Arab Light prices to Asia, Saudi Aramco also adjusted prices for other crude grades destined for Asia, lowering them by $2 per barrel in February compared to the previous month, as outlined in the official statement.
 
For other regions, the February Arab Light OSP to northwest Europe was cut by $2 per barrel to $0.90 per barrel above ICE Brent. Simultaneously, the OSP of Arab Light to the United States was reduced by $2 per barrel to $5.15 versus ASCI in February, completing the comprehensive adjustment in pricing strategy.