Saudi Arabia cut prices for oil sales in October, a sign that the world’s largest exporter sees demand for fuel fluctuate amid more coronavirus outbreaks around the world.
The kingdom’s state-owned producer Saudi Aramco cut its key grade of Arab Light crude by a larger amount than expected for shipments to Asia, its main market. It also lowered prices for American buyers.
Aramco cut Arab Light to Asia at a discount to the reference price of oil used by the Saudis for the first time since June. It is the second consecutive month of barrel reductions in the region and the first month of six that US refineries will see a cut. Aramco will also cut prices for lighter barrels for Northwest Europe and the Mediterranean region.
Demand for oil has plummeted this year after the pandemic forced governments to lock down economies, airlines to call off struggles and workers to stay home. Saudi Arabia, Russia and other OPEC + producers agreed in April to cut production by nearly 10 million barrels a day, about 10% of global supply, to boost prices.
Since then, those cuts and a recovery in demand in China have helped oil prices to double. But they are still down about 35% this year. Brent crude fell to $ 42.66 on Friday, suffering its biggest weekly loss in nearly three months as infection rates continue to rise in countries like the United States and India.
“Aramco understands the importance of China to the global oil market,” said Giovanni Staunovo, a commodities analyst at UBS Group AG. “The October cut could help support stronger imports from China in the coming months.”
The company is cutting prices for light exports to Asia in October by $ 1.40 a barrel to 50 cents below the regional benchmark. It was expected to cut prices by $ 1 a barrel at a discount of 10 cents, according to a Bloomberg survey.
The Saudis raised prices from June to August for Asia. However, demand from refineries has moderated due to weak earnings from converting crude into gasoline and other fuels. Asian refineries are also working through large reserves accumulated at the beginning of the year when crude prices rose.
Aramco is cutting prices for U.S. buyers for the first time since April after Saudi oil exports to the country fell to their lowest level in decades in August.
Saudi Arabia often sets the tone for the pricing decisions of other Middle Eastern petrostats, including Iraq and the United Arab Emirates, the second and third largest producer in the Organization of the Petroleum Exporting Countries.
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