By Anthony Di Paola and Salma El Wardany
State oil producer Saudi Aramco is cutting its benchmark Arab Light crude more than expected and lowering the grade to a discount for the first time since June for buyers in Asia. Itâs the second-consecutive month of cuts for barrels to Asia. Aramco will also trim pricing for lighter barrels to northwest Europe and the Mediterranean region.
Aramco is reducing pricing to Asia for October shipments of the Light grade by $ 1.40 a barrel, to 50 cents below the regional benchmark. The company was expected to pare pricing by $ 1 a barrel, to a 10-cent discount, according to a Bloomberg survey of eight traders and refiners.
Oil demand has plunged this year as the pandemic forced governments to lock down economies, airlines to cancel fights and workers to stay at home. Saudi Arabia joined with Russia and other producers in the OPEC+ coalition to make record cuts in production, taking about a 10th of global supply off the market. Crude prices have more than doubled since April to around $ 45 a barrel but are still down more than 30% this year.
The Saudis had previously supported the rally by raising pricing each month from June to August. However, demand from refineries has softened due to weak profits from turning crude into gasoline and other fuels. Even as economies began to recover, swollen stockpiles — rather than supplies of fresh crude — absorbed much of the increase in demand.
Saudi Arabia usually sets the tone for pricing decisions by other Middle Eastern suppliers, including Iraq and the United Arab Emirates, the second- and third-largest producers in the Organization of Petroleum Exporting Countries.