Saudi Arabia’s oil giant Aramco usually tells customers on the 5th of each month how much they will pay for Saudi crude oil for the following month. But this month the 5th is not just any ordinary date—apart from the coronavirus outbreak, Saudi Aramco should take into account the OPEC+ decision about deeper cuts in Q2—and this decision will come on the 6th.
So Aramco, which in ten years has never missed publishing its official selling prices (OSPs) for the following month on the 5th of each month, has postponed the pricing announcement from Thursday to Saturday, sources familiar with the plans told Bloomberg on Thursday.
In pricing its oil, Saudi Arabia takes into account the availability of its oil and the overall demand on the markets in various regions—and the availability metric is unquantifiable as of Thursday.
OPEC proposed on Thursday that the OPEC+ coalition, which includes the non-OPEC partners led by Russia, deepen the production cuts by 1.5 million bpd in Q2. Such a deal hinges on Russia’s approval, and Russia—as usual—is not giving away anything ahead of the very day of the full meeting of the OPEC and non-OPEC producers, which is set for Friday.
Saudi Aramco, the state-owned firm of OPEC’s largest producer, is thus waiting for the official decision for cuts (or no cuts) in order to set its official selling prices for April.
Last month, Saudi Arabia reacted to the depressed demand in Asia due to the coronavirus by slashing its official selling prices (OSPs) to the region for March.
According to a Reuters poll of six refiners, Aramco is expected to further slash its OSP for its flagship Arab Light grade bound for Asia for April by US$2.04 a barrel on average, which would be the deepest cut in Saudi pricing in more than eight years—since early 2012, as per Refinitiv Eikon data.
A second consecutive cut in prices for Asia suggests that demand has slumped in the key oil growth market due to the coronavirus outbreak.
Last week, Saudi Arabia was said to be cutting its crude exports to China by at least 500,000 bpd in March because of a slump in refinery demand amid the outbreak.
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.