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Saudi’s to Slash Price of Crude Bound for U.S/Asia

September 7, 2020

Saudi

Saudi Arabia has slashed its prices for its October shipments to the U.S and Asia, in what appears to be a clear sign they now recognize the wavering demand for Crude Oil amid flare-ups of Coronavirus around the Globe.

State oil giant Saudi Aramco is surprisingly cutting its benchmark Arab Light crude more than expected and reducing the grade to a discount for the first time since June for buyers in Asia. It’s the second-consecutive month of cuts for barrels to Asia. Aramco will also cut pricing for lighter barrels to northwest Europe and the Mediterranean region.

Aramco is reducing pricing to Asia for October shipments of the Light grade by $1.40 a barrel, to 50 cents below the regional benchmark. The company was expected to pare pricing by $1 a barrel, to a 10-cent discount.

Demand for Oil has plunged this year as the pandemic forced governments to lock down economies, airlines to cancel flights, and workers to stay at home. Saudi Arabia joined with Russia and other producers in the OPEC+ coalition to make record cuts in production, taking about a 10th of global supply off the market. Crude prices have more than doubled since April to around $45 a barrel but are still down more than 30% this year.

The Saudis had previously supported the rally by raising pricing each month from June to August. However, demand from refineries has softened due to weak profits from turning crude into gasoline and other fuels. Even as economies began to recover, swollen stockpiles — rather than supplies of fresh crude — absorbed much of the increase in demand.

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

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