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Saudi Arabia has cut the official selling price (OSP) for its Arab Light crude oil to Asia, sources said on Thursday.
That makes the Arab Light grade price a premium of $2.55 per barrel compared to the Oman/Dubai average. The cut, to go into effect next month, represents a $0.25 per barrel cut month over month. Saudi Arabia’s June OSP for the United States $6.25 per barrel premium vs ASCI, with prices to NW Europe set at a $2.10 per barrel premium to ICE Brent.
The move shows an expected weakness in Asian demand for Middle Eastern crude oil.
Saudi Arabia’s crude oil price moves are a closely watched element in the oil markets and are generally viewed as a trendsetter when it comes to crude oil pricing. Saudi Aramco—The Kingdom’s state-run oil company—typically sets its crude oil prices near the beginning of each month for the following month, taking into consideration customer recommendations and oil value. For Saudi Arabia, it must compete with both India’s and China’s eagerness to snap up cheap Russian crude oil. Asia has also been hit with falling refining margins, reaching a six-month low last week—not exactly an incentive for Asia to ramp up Middle Eastern crude oil imports. Higher crude oil prices coupled with lower refining margins could prompt Asia to slow imports of ME crude.
The Middle Eastern nation is part of the OPEC+ alliance that moved to cut another 1.6 million barrels per day of crude oil production off their quotas in what was a shock to the market. Prices were sent soaring at the announcement, although all gains made at the time have since been erased on demand fears courtesy of Fed tightening and disappointing demand data coming out of Asia’s industry.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.