Tue, Aug 02, 2016 - Page 10 News List

Saudi Arabia cuts Asian oil price most in 10 months

Bloomberg

Saudi Arabian Oil Co, the world’s largest oil exporter, lowered the pricing terms for Arab Light sold to Asia by the most in 10 months, as refineries grapple with falling margins and oversupply.

The state-owned company, also known as Saudi Aramco, on Sunday said it would sell cargoes of Arab Light next month at US$1.10 a barrel below Asia’s regional benchmark.

That is a pricing cut of US$1.30 from this month, the biggest drop since November last year, according to data compiled by Bloomberg.

The company was expected to lower the pricing by US$1 a barrel, according to the median estimate in a Bloomberg survey of eight refiners and traders.

Aramco’s pricing cut is part of a “market share battle” for Asian customers, particularly with OPEC rival Iran, which is ramping up crude exports after sanctions eased in January, John Kilduff, partner at Again Capital LLC in New York, said by phone on Sunday.

Refineries in China “bought a lot of extra crude earlier this year when prices were lower, so they’re going to have to work that off,” Kilduff said.

Refineries from Singapore to China and South Korea are cutting operating rates amid a slump in margins and rising supply from state-owned giants such as China Petroleum and Chemical Corp (中國石油化工).

In China, independent refiners are operating at less than half their capacity at a six-month low, according to data compiled from Oilchem.net.

Brent crude has climbed 17 percent since the start of the year on supply disruptions from Nigeria to Canada. Prices are still 16 percent lower in the past year. Saudi Arabia led the November 2014 decision by OPEC to maintain production levels to drive out higher-cost producers.

All other official selling prices for Asian clients were reduced. The biggest cut was by US$1.60 for Extra Light crude. Pricing for Light and Extra Light grades for US clients was cut, by US$0.20 and US$0.40 respectively, while the Medium and Heavy grades were unchanged. Aramco raised the pricing of all grades except Extra Light to northwest Europe and the Mediterranean.

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