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.
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