Saudis reduce oil pricing signalling demand recovery struggling – News24

Saudis reduce oil pricing signalling demand recovery struggling – News24
  • Saudi Arabia, the world’s biggest oil exporter, has cut pricing for oil sales in October.
  • This has been taken as a sign that fuel demand is wavering.
  • Oil demand has plunged this year due to lockdowns instituted globally as a result of the Covid-19 pandemic.

Saudi Arabia cut pricing for oil sales in October, a sign
the world’s biggest exporter sees fuel demand wavering amid more coronavirus
flare-ups around the globe.

The kingdom’s state producer, Saudi Aramco, reduced its key Arab Light grade of crude by a larger-than-expected amount for shipments to Asia, its main market. It also lowered pricing for US buyers.

Aramco cut Arab Light to Asia to a discount against the
benchmark oil price used by the Saudis for the first time amount for shipments to Asia, its main market. It also lowered pricing for US buyers since June. It’s the
second consecutive month of reductions for barrels to the region and the first
month in six that US refiners will see a cut. Aramco will trim pricing, too,
for lighter barrels to northwest Europe and the Mediterranean region.

Oil demand has plunged this year after the pandemic forced
governments to lock down economies, airlines to cancel fights and workers to
stay at home.

Saudi Arabia, Russia and other OPEC+ producers agreed in April
to slash output by almost 10 millions barrels a day, roughly 10% of global
supply, to bolster prices.

Those cuts and a demand recovery in China have since helped
oil prices more than double. But they’re still down around 35% this year. Brent
crude fell to $42.66 on Friday, suffering its biggest weekly loss in almost
three months as infection rates continue to climb in nations such as the US and
India.

“Aramco understands the importance of China for the
global oil market,” said Giovanni Staunovo, a commodities analyst with UBS
Group AG. “The cut for October might help to support stronger imports from
China over the coming months.”

The company is reducing pricing for Light exports to Asia in
October by $1.40 a barrel to 50 cents below the regional benchmark. It was
expected to pare pricing by $1 a barrel to a 10-cent discount, according to a
Bloomberg survey.

The Saudis raised pricing from June to August for Asia. However,
refinery demand has softened due to weak profits from turning crude into
gasoline and other fuels. Asian refiners are also working through large
stockpiles built up earlier in the year when crude prices troughed.

Aramco is cutting prices for US buyers for the first time
since April after Saudi oil exports to the country dwindled to the lowest in
decades in August.

Saudi Arabia usually sets the tone for pricing decisions by
other Middle Eastern petrostates, including Iraq and the United Arab Emirates,
the second- and third-largest producers in the Organisation of Petroleum
Exporting Countries.

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