According to Reuters article published on January 4, 2023, top oil exporter Saudi Arabia may further cut the prices for its flagship Arab Light crude grade to Asia in February, after they were set at a 10-month low this month, as concerns of oversupply continued to cloud the market.
State oil giant Saudi Aramco may cut the official selling price (OSP) for the medium sour grade by about $1.50 a barrel in February, according to four respondents surveyed by Reuters, in line with the move in the Dubai benchmark.
That would drag the February Arab Light price to a level last seen in November 2021, and about $1.75 a barrel over the Oman/Dubai average.
"The near-term market outlook is dim. More Russian barrels are expected to flow to Asia, but demand is not picking up," said one respondent.
The price cut comes as Russia diverts its oil from Europe to Asia, after the European Union banned seaborne crude oil imports from Dec. 5, alongside a price cap introduced by the Group of Seven (G7) nations that restricts Russian oil trade using Western financial, shipping and insurance services.
Though Moscow last week banned crude sales to countries that observe the price ceiling on Russian crude oil, its key oil clients in Asia would be unaffected as they did not join the price cap coalition.
Russia became the top crude supplier to both China and India in November, as the Asian countries took advantage of the steep discounts while the western countries eschewed business with Moscow.
Oil demand is also unlikely to return imminently even though China has removed its stringent COVID-19 restrictions. The sharp spike of infections in the country has dampened people's willingness to travel, the respondents said.
China has raised export quotas for refined oil products in 2023's first batch, a further effort to spur refinery production and capture healthy export margins amid slow domestic demand. read more
Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude bound for Asia.
Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.
Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.
