RIYADH: Saudi Arabia cut pricing for next month’s oil sales to Asia and the US as the world’s largest crude exporter seeks to keep its barrels competitive with rival suppliers amid sluggish demand.
Saudi Arabian Oil Co (Saudi Aramco) reduced its official selling price for medium-grade crude to Asia next month to a discount of US$3.20 a barrel below the regional benchmark, compared with a US$1.30 discount for this month’s sales, the company said on Sunday in an e- mailed statement.
The discount for the medium-grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a US$2 a barrel cut in February 2012, according to data compiled by Bloomberg.
Brent crude, a global benchmark, tumbled almost 50 percent last year as Saudi Arabia and other OPEC members chose to protect market share instead of decreasing output to boost prices.
Brent fell from more than US$100 a barrel in July last year to less than half that amount six months later and traded below US$50 a barrel on average last month. Contracts for next month’s settlement were US$0.40 higher at US$48.53 a barrel yesterday at 7:19am in London.
“They needed to cut pricing to keep Saudi crude competitive with other grades,” Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by telephone. “Demand has been a bit weaker, leading to the cuts.”
Saudi Arabia will continue investing in oil production even amid the low prices, Saudi Minister of Petroleum and Mineral Resources Ali al-Naimi said in a speech in Istanbul, in comments reported by state-run Saudi Press Agency on Friday last week.
Volatile oil prices affect investments, creating a situation that is not good for producers or consumers, he said.
“We have to do the right thing,” al-Naimi said in an interview published yesterday in India’s the Economic Times. “The right thing is keep focused on demand and supply.”
Commercially viable producers “will continue to prevail,” and OPEC would increase its market share, he said.
Saudi Aramco, as the producer is known, widened the discount for Arab light crude to Asia by US$1.70 a barrel to US$1.60 a barrel less than the benchmark, according to the statement.
The cut was smaller than the median estimate of a US$1.90 a-barrel reduction expected by seven refiners and traders in Asia surveyed by Bloomberg last week. The decrease was the deepest since January.
The company trimmed next month’s pricing for its light, medium and heavy grades to the US by US$0.30 a barrel each. Medium crude will sell at a discount of US$0.85 a barrel to the regional benchmark, the widest since March.
The company raised price levels for the same three grades for buyers in Northwest Europe. It trimmed pricing on light, medium and heavy sold to the Mediterranean region.
OPEC, of which Saudi Arabia is the largest producer, decided in December last year and again in June to keep its production target unchanged at 30 million barrels a day. The group has exceeded this official target every month since May last year.
Saudi Arabia boosted output to a record 10.48 million barrels a day in June, according to the International Energy Agency.
The kingdom pumped 10.3 million barrels daily last month as it exited its peak summer period for domestic demand, data compiled by Bloomberg showed.
Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners.
