Faced with a persisting oversupply and trying to keep its market share amid production cuts intact, Saudi Arabia has unexpectedly lowered the April price for the light crude it sells to Asia.
According to trade sources who spoke to Reuters, Saudi Arabia's official selling price (OSP) for Arab Light was set for April at the low end of the range expected by a Reuters survey. The price for Arab Extra Light was cut by $0.75, which is more than expected.
The Saudis had raised the prices for February and March since the OPEC output deal has strengthened the Middle East oil benchmark Dubai that many Middle East state oil companies use to price their crude grades bound for Asia. Saudi Arabia had raised the prices of all grades it would be shipping in March to Asia, the U.S., Northwest Europe and the Mediterranean countries; prices for Asian buyers increased more than expected.
But now, oversupply of light crude persists, and the Saudis are not ceding their prized Asian markets.
"They are serious about market share now. Many barrels are left [unsold]," an Asian crude buyer who has business dealings with Saudi Aramco told Reuters.
OPEC, and Saudi Arabia of course, is trying to hold onto its market share in Asia after the production cuts resulted in higher Middle Eastern benchmark prices and narrower spreads versus Brent and WTI, which has made light crude shipments to Asia profitable from regions such as the U.S. and northern Europe. Related: Exxon Betting Big On U.S. Shale
"Light crude is under pressure all over the world," a trader said to Reuters.
As for the Arab Heavy grade, Saudi Arabia kept its April prices unchanged, compared to expectations that it would cut the price. This could be a sign that Arab Heavy supplies could stay tight, traders told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More