In a surprise move, Saudi Arabia, the world’s largest oil exporter, may cut the price of its Arabian light crude oil to Asia in June. This decision was made despite a further reduction in production of OPEC+ and a recent increase in Middle Eastern crude oil prices due to supply problems in Asia. Saudi Aramcothe state-owned oil giant, may reduce the official selling price of its medium and sour crude by about 40 cents per barrel in June, after three months of price increases.
Middle East crude oil commercial contracts in Asia slow down
According to five people interviewed by Reuters, the move is a response to falling fuel prices and growing demand for cheap Russian crude oil in China and India. The refining margin for a typical Asian refiner, which processes Middle Eastern crude oil, hit a six-month low of $2.35 a barrel last Friday, and diesel margins fell 27% this month, while gasoline margins fell 49%.
As a result, the flow of commercial contracts for Middle Eastern crude oil to Asia has slowed, and some refiners are considering production cuts while many in the region have already set maintenance schedules for June-August. If oil prices continue to rise, refineries will have to scale back operations, reduce purchases and operate with low feedstock inventories before their turnarounds, according to one respondent.
Saudi Arabia takes action on falling fuel prices
The market also expects China to issue a new batch of refined product quotas soon, adding more supply to an already saturated market. Discounted Russian crude oil has been acquired by refiners in China and India, the world’s largest and third largest oil importers, replacing demand for Middle Eastern crude oil.
Saudi crude OSPs (official selling prices) are usually published around the 5th of each month and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels of crude oil destined for Asia. Saudi Aramco officials do not comment on the kingdom’s monthly PSOs as a matter of policy.
In response to falling fuel prices and growing demand for cheap Russian crude oil in China and India, Saudi Arabia, the world’s largest oil exporter, plans to cut the price of its Arabian light crude oil to Asia in June. This decision was made despite a further OPEC+ production cut and a recent increase in Middle Eastern crude oil prices due to supply problems in Asia.
