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Saudi cuts light oil prices to Asia as global oversupply persists
[SINGAPORE] World's top crude exporter Saudi Arabia cut April prices of light crude it sells to Asia for the first time in three months in a bid to shore up demand in an oversupplied market, trade sources said on Friday.
The Opec kingpin raised prices for two straight months to March after production cuts by the Organization of the Petroleum Exporting Countries and Oman strengthened Middle East oil benchmark Dubai, but it unexpectedly cut prices in April as oversupply of light crude persisted.
The April (OSP) for Arab Light was set at the low end of forecasts in a Reuters survey and the 75-US cent cut for Arab Extra Light was deeper than expected.
Saudi Aramco took into account other factors such as a stronger Oman-Dubai benchmark when setting prices this month, traders in Asia said.
"They are serious about market share now. Many barrels are left (unsold)," said an Asian crude buyer who declined to be named as it has business dealings with Saudi Aramco.
Rising output from Nigeria and Libya, which are exempted from Opec cuts, and a ramp-up in exports from Europe and the United States are flooding Asia with more light crude than the region could use.
The United Arab Emirates also added to light oil supplies after it sold more flagship Murban crude after a refinery outage early this year. The Abu Dhabi National Oil Company (ADNOC) is also selling the light oil from storage tanks that it had leased in South Korea.
"Light crude is under pressure all over the world," said a second trader with a company that moves crude globally.
The spread between Arab Light and Heavy at US$2.45 a barrel, the narrowest since September, as the Opec cuts tightened supplies of heavier crude which are cheaper.
Saudi kept the April OSP for Arab Heavy unchanged, against expectations of a price cut, a sign that supplies could remain tight, traders said.
Light crude has a better yield of more valuable products such as gasoline and diesel, hence it is usually more expensive than heavy crude.
Saudi Arabia is shouldering the bulk of Opec cuts in February to compensate for the weaker adherence of other members namely Algeria, Iraq, Venezuela and the United Arab Emirates.