Saudi Arabia has slashed the September price for its Arab Light crude oil for Asian customers by $1.30 a barrel, the largest cut for the flagship grade in nearly a year, helping to shore up sales ahead of fall in demand in October.
About 1mn barrels a day of processing capacity in Asia will be shut in October, according to data on Thomson Reuters Eikon, the biggest shutdown in 2016 as refiners try to cope with weak refining margins and high fuel inventories.
Saudi Arabia’s move to lower the official selling price (OSP) is likely to intensify competition with rivals such as Russia and the United Arab Emirates, who produce similar oil grades and are also looking for a bigger share of the market in Asia, the world’s top oil consuming region.
The official selling price (OSP) for Arab Light to Asia was set at a discount of $1.10 to the Oman/Dubai average, the lowest since January, state oil company Saudi Aramco said on Sunday.
The price cut was the largest since a $1.70 a barrel drop for October 2015, Reuters data showed, and was seen as aggressive as several traders had expected cuts of about $1.
Price cuts for heavier grades Arab Medium and Heavy were in line with traders’ expectations, supported by stronger fuel oil cracks.
Iraq overtook Saudi Arabia for the first time in the June quarter to be India’s top oil supplier, helped by sales of discounted heavy crude that refiners have also been using to make bitumen to build roads in the world’s No.3 oil consumer.
OPEC’s top producer has lost ground in a number of major global markets including to Russia in China, and is facing a further threat from Iran, which is ramping up exports after Western sanctions were removed.
For northwest Europe, Saudi Aramco raised its September OSP for Arab Light by $0.25 a barrel from August to a discount of $4.25 a barrel to the Brent Weighted Average (BWAVE).
The Arab Light OSP to the United States was cut by $0.20 a barrel to plus $0.25 a barrel to the Argus Sour Crude Index (ASCI), it said in a statement.
Saudi Aramco’s chief executive said this month the company was not worried about competition from other producers raising their crude sales in Asia as the number of customers the state oil giant deals with is also increasing.
Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12mn barrels per day (bpd) of crude bound for Asia.
