Saudi Arabia cuts light crude prices to Asia, looking to shore up demand

Saudi Arabia fights for market share

In a bid to shore up demand in an oversupplied market, for the first time in three months, Saudi Arabia cut April prices of light crude that it sells to Asia.

For two months, Saudi Arabia increased prices to Asia after production cuts agreed to by OPEC members and some non-members strengthened Middle East oil benchmark Dubai.

Despite the production cuts, an oversupply of light crude remained.

Reuters reports the April (OSP) for Arab Light was set at the low end of forecasts and the 75 cent cut for Arab Extra Light was deeper than anticipated.

In pricing the light crude for sale to Asia, Saudi Aramco took into account a stronger Oman-Dubai benchmark.

“They are serious about market share now. Many barrels are left (unsold),” an Asian crude buyer told Reuters.  The source declined to be named as it has business dealings with Saudi Aramco.

Adding to the supply glut of light crude, output from Nigeria and Libya, exempt from OPEC cuts, has increased and light crude exports from Europe and the US are flooding the Asian market.

Also, following a refinery outage earlier this year, the United Arab Emirates sold more Murban crude, adding to light crude supplies.  As well, the Abu Dhabi National Oil Company (ADNOC) is selling light crude from South Korean storage tanks.

 

Another oil trader told Reuters “Light crude is under pressure all over the world.”

The increase in light crude has narrowed the spread between Arab Light and Heavy, bringing it to $2.45/barrel.  That is the narrowest it has been since September as OPEC cuts tightened supplies of heavier crude which are cheaper.

Traders report that despite expectations of a price cut, Saudi Arabia kept the April OSP for Arab Heavy unchanged, signalling that supplies could remain tight.