Saudi Arabia, the world's largest oil exporter, may reduce October prices for most crude grades it exports to its Asian customers, following a drop in spot premiums as reduced demand for fuel and rising arbitrage cargoes has pressurised prices of oil in the region.
According to reports based on a review of five refining sources, Saudi Aramco may reduce the official selling price (OSP) for its premier Arab Light crude by around $4.50 per barrel in October.
This would mark the first reduction in price in Saudi Arabia in about four months, following the country raising to record heights in September for its OSP which were at $10.95 per barrel for Arab Extra Light versus the Oman/Dubai average and $9.80 per barrel for Arab Light.
Premiums for regional benchmarks on the spot Fears of a global recession, as well as the constriction of spread between Dubai- and Brent-linked grades, dampened demand for Middle Eastern crude oil in August.
When setting prices, Saudi Arabia usually takes signals from Dubai's market structure, which takes into account the first- and third-month price spread. The spread fell by about $4.26 per barrel in August.
"The overall demand in Asia is not very strong. As more arbitrage cargoes from the United States and West Africa flow into Asia, supply tightness concerns have mostly eased," said one respondent.
Even though there are anticipations of a recovery in demand for oil from India and Indonesia after the end of the monsoon season in the two countries sometime in late September, analysts have predicted weak demand for oil consumption and demand from China, the largest oil importer of the world, as the nation is still struggling with lockdowns and restrictions related to the Covid-19 pandemic.
Sinopec, Asia's largest oil refiner, expects second-half refinery throughput to drop by 8 per cent compared to the same period a year ago , and annual processing volume to drop by 6 per cent compared to the same period of 2021.
"Some Saudi cargoes that were shipped to the west are now flowing back to Asia because of sluggish demand in Europe, which would also depress prices," said another respondent.
Some largest oil producers of the world, that includes Saudi Arabia and the United Arab Emirates, have hinted at imposing drop in production of oil to help balance the oil market. Saudi crude OSPs are typically released around the fifth of each month, and they set the trend for Iranian, Kuwaiti, and Iraqi prices, affecting over 9 million barrels per day (bpd) of crude bound for Asia.
Saudi Aramco determines crude prices based on customer recommendations and after calculating the change in the value of its oil over the previous month based on yields and product prices.
Saudi Aramco officials do not comment on the kingdom's monthly OSPs as a matter of policy.
(Source:www.economictimes.com)
According to reports based on a review of five refining sources, Saudi Aramco may reduce the official selling price (OSP) for its premier Arab Light crude by around $4.50 per barrel in October.
This would mark the first reduction in price in Saudi Arabia in about four months, following the country raising to record heights in September for its OSP which were at $10.95 per barrel for Arab Extra Light versus the Oman/Dubai average and $9.80 per barrel for Arab Light.
Premiums for regional benchmarks on the spot Fears of a global recession, as well as the constriction of spread between Dubai- and Brent-linked grades, dampened demand for Middle Eastern crude oil in August.
When setting prices, Saudi Arabia usually takes signals from Dubai's market structure, which takes into account the first- and third-month price spread. The spread fell by about $4.26 per barrel in August.
"The overall demand in Asia is not very strong. As more arbitrage cargoes from the United States and West Africa flow into Asia, supply tightness concerns have mostly eased," said one respondent.
Even though there are anticipations of a recovery in demand for oil from India and Indonesia after the end of the monsoon season in the two countries sometime in late September, analysts have predicted weak demand for oil consumption and demand from China, the largest oil importer of the world, as the nation is still struggling with lockdowns and restrictions related to the Covid-19 pandemic.
Sinopec, Asia's largest oil refiner, expects second-half refinery throughput to drop by 8 per cent compared to the same period a year ago , and annual processing volume to drop by 6 per cent compared to the same period of 2021.
"Some Saudi cargoes that were shipped to the west are now flowing back to Asia because of sluggish demand in Europe, which would also depress prices," said another respondent.
Some largest oil producers of the world, that includes Saudi Arabia and the United Arab Emirates, have hinted at imposing drop in production of oil to help balance the oil market. Saudi crude OSPs are typically released around the fifth of each month, and they set the trend for Iranian, Kuwaiti, and Iraqi prices, affecting over 9 million barrels per day (bpd) of crude bound for Asia.
Saudi Aramco determines crude prices based on customer recommendations and after calculating the change in the value of its oil over the previous month based on yields and product prices.
Saudi Aramco officials do not comment on the kingdom's monthly OSPs as a matter of policy.
(Source:www.economictimes.com)
