Saudi Arabia Cuts Oil Prices for Asia and EuropeSeptember 7, 2022
Saudi Arabia cut oil prices for customers in Asia and Europe as coronavirus lock-downs and sagging economies cool energy demand in the two regions.
State-controlled Saudi Aramco lowered its key Arab Light grade for October’s shipments to Asian refineries to $5.85 a barrel above the Middle Eastern benchmark. That was a decrease of almost $4 from the record-high set for this month.
The move was largely in line with traders’ expectations and follows a 25% drop in Brent crude futures in the past three months to below $95 a barrel.
It also came a day after OPEC+, the producers group that Riyadh leads along with Russia, agreed to a surprise, albeit token, production cut for October. The 23-nation alliance is seeking to stabilize oil markets amid faltering economies and rising inflation. In China, the world’s biggest crude importer, the spread of virus lock-downs is hurting manufacturers and retailers.
Aramco lowered all grades bound for Northwest Europe and the Mediterranean, most of them by $2 a barrel. The company raised pricing for US buyers by 50 cents, except for Arab Light, which was kept unchanged.
Despite signals of slowing consumption in major economies, the global market remains tight. Many analysts forecast that demand will outstrip supply in the final quarter of this year, especially if Russia reacts to a G7-proposed cap on its oil prices — designed to punish Moscow for its invasion of Ukraine — by limiting exports.
Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview late last month that futures markets were “in a state of schizophrenia.” They are giving “a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” he said.