Saudi Arabia may cut its official selling price for crude oil by as much as $0.40-$0.50 per barrel for Asian buyers, Reuters has reported, citing sources from the refining industry.
The expected price cut concerns the flagship Arab Light grade that Saudi Arabia sells abroad, but other grades are also expected to see cuts, albeit smaller ones, at between $0.30 and $0.45 per barrel, according to the sources.
The reason for these expectations is the decision by OPEC+ to keep returning supply to the market. OPEC+ is meeting later today and most observers appear to have assumed it will announce yet another monthly hike of 411,000 barrels daily for July. It is this expected hike that, according to the Reuters refining sources, will drive lower prices for Saudi oil.
Indeed, earlier this year, Saudi Aramco cut its official selling price for crude amid OPEC’s production ramp-up, with Arab Light seeing a $0.40 price cut per barrel for March. Another grade, Arab Extra Light, saw a price cut of $0.60 per barrel at the time.
However, this month, the Saudis actually raised their official selling prices for Asian oil buyers. n a sign that the world’s top crude oil exporter expects solid demand in Asia next month, the Saudis lifted the price of the Arab Light crude grade for June by $0.20 per barrel over May prices to a premium of $1.40 a barrel over the Oman/Dubai average, the benchmark off which Middle Eastern producers price their crude loading for Asia.
In this context, then, it is difficult to say with any degree of certainty what Saudi Arabia would do with its official selling prices, although a cut would make more sense as it seeks to regain market share lost because of the production curbs that OPEC+ agreed to adopt back in 2022.
Source: By Irina Slav from Oilprice.com