Saudi Arabia cuts oil prices for Asia as India battles virus

[DUBAI] Saudi Arabia lowered prices for oil shipments to customers in its main market of Asia as a surge in coronavirus cases crimps energy demand in India, the world's third-largest crude importer.

The kingdom's state energy firm, Saudi Aramco, reduced pricing for June shipments to the continent by between 10 and 30 US cents per barrel.

The key Arab Light grade for Asia was cut to US$1.70 a barrel above the benchmark from US$1.80 for May. That's the first reduction in official selling prices (OSP) for the grade since December, signalling weakness in Asian oil markets.

The reductions had been anticipated in the market. Aramco had been expected to lower Arab Light's premium by 20 US cents, according to a Bloomberg survey of seven traders and refiners.

Saudi Energy Minister Prince Abdulaziz bin Salman has urged fellow members of Opec+ to be cautious as the group eases supply cuts started last year when the pandemic was hammering energy markets.

The 23-nation cartel plans to increase daily output by just over two million barrels through to July, beginning with 600,000 this month. That would still leave production roughly five million barrels a day below pre-pandemic levels.

Aramco raised pricing to the US by 20 US cents a barrel for all grades. The nation is adding jobs amid economic growth and a push for widespread vaccinations.

The company cut pricing for all shipments to North-western Europe and the Mediterranean, where efforts to bolster the economy and ease lockdowns have met with mixed results.

Brent crude has climbed almost 35 per cent this year, closing in on US$70 a barrel as vaccination rollouts enable the US, Europe and some other major economies to reopen. Aramco chief executive officer Amin Nasser said on Tuesday he's more optimistic about the outlook for oil.

Still, the pandemic has rapidly worsened in India since the start of April. The country is now reporting around 400,000 cases every day.

Most Middle Eastern coutries set monthly oil prices as a premium or discount to a benchmark. Aramco's OSPs serve as a bellwether for oil markets and often lead the pricing trend in the region.

Abu Dhabi issued its first OSP based on trading in crude futures this month, a step in its efforts to establish its crude as the regional benchmark.

BLOOMBERG