Saudi Arabia, the leading oil exporter, announced on Sunday a reduction in the February price of its flagship Arab Light crude for Asian customers.
The move, highlighted in a company statement, reflects the lowest pricing in 27 months, as Saudi Aramco aims to stay competitive amidst challenges from rival suppliers and concerns about a supply overhang.
Saudi Aramco (2223.SE) implemented a significant cut in the official selling price (OSP) for February-loading Arab Light to Asia, reducing it by $2 a barrel compared to January.
The new price is set at $1.50 a barrel over Oman/Dubai quotes, reaching a level last observed in November 2021. This marks the most substantial price reduction in 13 months and aligns with market expectations, as refiners sought competitive prices in comparison to crude oil supplied by other Middle Eastern producers and arbitrage cargoes from the Atlantic Basin.
While Saudi crude remains relatively more expensive than other regional options, the price adjustment has been welcomed by market participants, making it more affordable.
A trader from a North Asian refinery noted, "Saudi crude is still relatively more expensive compared to other regional crude. But we are happy enough to see such prices, making it much more affordable for us."
The softening of the Asian physical oil market over the past month reflects expectations of reduced supply tightness and weaker demand due to scheduled maintenance shutdowns at some Asian refineries during the spring season in the northern hemisphere.
Despite a combined voluntary output cut of 2.2 million barrels per day by the OPEC+ group of oil producers, doubts persist among market participants regarding the effectiveness of supply reduction in preventing a buildup in global oil inventories and fueling an oil price rally until at least the second quarter of 2024.
Saudi Aramco also adjusted prices for other crude grades sold to Asia, reducing them by $2 a barrel for February compared to the previous months, according to the company statement. Additionally, the February Arab Light OSP to northwest Europe was lowered by $2 a barrel to $0.90 a barrel above ICE Brent. The OSP of Arab Light to the United States saw a $2 reduction to $5.15 versus ASCI in February.
