The world's top oil exporter, Saudi Arabia, appears unconvinced that near-term demand has much room to grow as it reduced its official selling price for its flagship crude grade to its key market Asia.
Saudi state oil giant Aramco cut on Thursday its official selling price (OSP) for the Arab Light crude grade shipped to Asia in December by $0.10 a barrel to a discount of $0.50 versus the benchmark Oman/Dubai average, off which Middle Eastern producers price the crude oil they sell in Asia, Bloomberg reported.
The cut was in line with Asian refiners' expectations, who said in a Reuters survey last week that they expected either a small cut in prices or flat prices for December compared to November, because of weakening refining margins and weakening Dubai benchmark prices.
The pricing of Saudi crude, typically released around the fifth of each month, generally sets the trend for the pricing for Asia of other Gulf oil producers such as the United Arab Emirates (UAE), Kuwait, Iraq, and Iran. The pricing of Saudi Aramco affects as much as 12 million barrels per day (bpd) of Middle Eastern crude grades going to Asia.
The Saudis also cut the prices for all their grades sold in the United States, but lifted all prices for Saudi crude going to Europe and the Mediterranean for December.
The Saudi cut for its flagship crude to Asia is in contrast with last month's increase in the price of Arab Light, which the market interpreted as a sign that the world's top oil exporter sees demand strengthening.
However, since early October, markets have been increasingly concerned about near-term oil demand as the second COVID-19 wave in Europe and the United States, and in parts of Asia, threatens to unravel the recovery from the second-quarter slump.
OPEC Secretary General Mohammad Barkindo himself said last week that global economic and oil demand recovery was still anemic, while the return of lockdowns in major economies in Europe-including France, Germany, and the UK-sent the Brent price below $40 a barrel last week.
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