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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Is Saudi Arabia Restarting The Oil War?

Saudi Arabia’s oil giant Aramco has just announced the pricing for its oil for May, with deeper discounts for customers in Asia for the second month in a row, despite Sunday’s historic global production cut deal.

Aramco has delayed the announcement of its official selling prices (OSPs) for May several times in the past few days while producers were trying to unlock the ‘Mexican standoff’ in the talks on a 10-million-bpd production cut deal.

After the deal was sealed on Sunday, Saudi Arabia’s state oil giant said on Monday that it would be cutting the price of its flagship Arab Light crude grade to Asia by another US$4.20 per barrel compared to April, to a discount of US$7.30 a barrel to the Oman/Dubai benchmark average, documents seen by Reuters showed.     

Saudi Arabia’s prices to Europe remain basically flat compared to the April pricing, while prices for the United States were raised. Arab Light will be sold to the United States at US$3 a barrel higher than in April—at a discount of US$0.75 per barrel versus the ASCI benchmark.  

Last month, the Saudis slashed all their prices for all regions for April, after OPEC’s top producer and its partner in the OPEC+ pact, Russia, broke up the production cut deal and the Saudis waged a price war for market share by discounting their oil deeply to all markets.

The additional hefty discounts to Asia for May suggest that the Saudis are continuing to pay for market share there, but the rise in prices to the U.S. and flat month-on-month prices to Europe suggests that the Kingdom is trying to please U.S. President Donald Trump and Russian President Vladimir Putin, respectively, according to analysts.

The price hike for the Saudi crude selling in the United States is likely “designed to keep Trump happy,” Ole Hansen, head of commodity strategy at Saxo Bank, told Bloomberg.

“Aramco is still prepared to fight for its market share. While the U.S. hike is symbolic, the real challenge, in terms of maintaining market share, can be seen through the lower OSP to Asia,” Hansen said.   

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • John Ritchie on April 13 2020 said:
    Tsvetana,

    It may be cheaper for Saudi to move oil into Asian markets, than to lease VLCC's and ULCC's and pay to have ships sit idle in the Persian Gulf.

    In an over-supply scenario, finding the lowest-cost storage point is what a smart Producer seeks.


    Blessings, John
  • Sudhir Vedpathak on April 14 2020 said:
    The 10 million bpd oil production cut deal is not going to help to increase the price.Today the PM Modi of India extended the nationwide lockdown till 3rd of May 2020.The demand of petrol/ diesel has been dropped heavily as 90-95% of the vehicles are not running.India is the 3rd biggest importer of crude oil after China, USA.
  • Mark Thespot on April 17 2020 said:
    It is time for the US to put pressure on the Saudis further. If they ever want their existing military arsenal and any new military purchases to work "as intended", they need to "understand" this problem and correct it...NOW.

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