Saudis cut oil pricing for Asia as Opec+ boosts crude supply

Saudi Arabia cut oil prices by more than expected for buyers in Asia, its biggest market, for October after Opec+ agreed to raise production.

Saudi Aramco is lowering pricing for Arab Light crude by $1.30 a barrel to a premium of $1.70 more than the regional benchmark, according to announcements seen by Bloomberg. The state producer had been expected to reduce the oil selling price of the grade by around 60 cents a barrel, according to a survey of six traders and refiners in Asia last week.

Opec+ producers this month decided to continue rolling back supply cuts implemented last year to support prices as the coronavirus slashed demand. Led by Saudi Arabia and Russia, Opec+ has moved cautiously to get oil back onto the market amid continued flare ups of the virus that are slowing economic recovery.

“Because of the high Saudi OSPS in previous months, traders have diverted to the spot market instead of using long term contracts,” said Giovanni Staunovo, a commodities analyst at UBS Group. Now Aramco is trying to get buyers to take more Saudi crude, he said. “With domestic demand likely leveling off in autumn, they have more barrels to be exported, so that’s another reason to offer more attractive OSPS for buyers.”

Refiners in Asia, who are Aramco’s biggest customers were surprised by the scale of the cuts in the official selling prices, or OSPS. The price reductions may signal an effort by the Saudis to grab hold of market share as they raise output, according to some of the buyers.