“Saudi Arabia cuts Asia-bound Arab Light crude price to 27-month low in February

In a notable development, Saudi Arabia, the leading global oil exporter, has opted to cut the February price of its primary Arab Light crude to Asian customers. This reduction, as highlighted in a company statement, brings the price to its lowest level in 27 months, responding to both competitive pressures from rival suppliers and concerns about a supply overhang.

Saudi Aramco executed a substantial cut, reducing the official selling price (OSP) for February-loading Arab Light to Asia by $2 a barrel from January, setting it at $1.50 a barrel over Oman/Dubai quotes. This marks the most significant price cut in 13 months and aligns with market expectations. Refiners had urged for competitive pricing from Saudi Arabia compared to crude oil supplied by other Middle Eastern producers and arbitrage cargoes from the Atlantic Basin.

Despite Saudi crude still being relatively more expensive than other regional options, traders from a North Asian refinery expressed contentment with the reduced prices, deeming them more affordable.

The softening of the Asian physical oil market over the past month is attributed to expectations of reduced supply tightness in the near term and weaker demand due to scheduled maintenance shutdowns at some Asian refineries during the spring season in the northern hemisphere.

Despite the OPEC+ group’s voluntary output cut of 2.2 million barrels per day, market participants remain skeptical that this reduction will be sufficient to curtail the build-up in global oil inventories and fuel an oil price rally until at least the second quarter of 2024.

Saudi Aramco extended its price adjustments to other crude grades sold to Asia, lowering them by $2 a barrel in February. Additionally, the company cut its February Arab Light OSP to northwest Europe by $2 a barrel to $0.90 a barrel above ICE Brent. The OSP of Arab Light to the United States saw a $2 per barrel reduction to $5.15 versus ASCI in February.