Saudi Arabia is likely to reduce the price of its crude oil for Asia in June in what will be the Kingdom’s first price cut this year amid signs of declining demand in India and weakening Dubai benchmark, according to a Reuters survey of Asian refiners.
Saudi Arabia, the world’s largest oil exporter, is expected to cut its official selling price (OSP) for the flagship Arab Light grade for Asia in June by an average of $0.28 per barrel, according to sources at Asian refiners Reuters has polled.
The expected price cut, if it materializes, would be the first time Saudi Arabia has reduced prices to Asia in 2021. The last time the Saudis lowered the price of crude to their most important market was in December 2020.
Uncertainty over demand in the world’s third-largest oil importer, India, as well as the weakest price structure at the Middle Eastern Dubai benchmark in nearly two months, are expected to be the key reasons for a reduction in the Saudi oil prices, according to the Reuters survey.
Sales of gasoline in India were the weakest in April since August 2020, officials with knowledge of preliminary data told Bloomberg. Average daily sales of diesel, the most used fuel in the country, slumped in April to the lowest level since last October, according to the preliminary estimates.
India’s demand for diesel, gasoline, and jet fuel is expected to further decline in the coming days and probably weeks, with no sign that the second COVID wave in the country would peak within days.
In addition, last week, the Dubai benchmark flipped to a slight contango, signaling not-so-tight market. Middle Eastern oil exporters, including Saudi Arabia, price their oil going to Asia off the Oman/Dubai average.
Last month, the Saudis raised their crude oil prices for Asian buyers in May by $0.40 per barrel, with the Arab Light pegged at $1.80 a barrel above the Oman/Dubai average.
By Tsvetana Paraskova for Oilprice.com
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