Saudis cut Asia oil prices after Opec+ deepens output curbs

SAUDI Arabia cut its official crude oil selling prices to Asia next month amid a continued supply glut, a sign of weakness in markets as Organization of Petroleum Exporting Countries (Opec) and its allies deepen production cuts in an attempt to avoid a surplus.

State-owned Saudi Aramco lowered its flagship Arab Light price to Asia by 50 cents to US$3.50 a barrel more than the benchmark for January, according to a price list seen by Bloomberg. However, that was less than the US$1.05 a barrel reduction estimated in a Bloomberg survey.

The cuts in Saudi prices highlight the heated competition to win Asian customers in an oversupplied market. Sweet or low-sulfur crudes, which are normally more expensive because they yield more valuable fuels, have been selling at very cheap prices in recent weeks. Premiums of Murban futures have plunged from a month ago while prices of US WTI Midland also tumbled.

Last week, Opec and its allies agreed to reduce joint supplies by more than 2 million barrels a day, about half of that coming from Saudi Arabia. The cuts can “absolutely” continue past the first quarter if needed, Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview on Monday (Dec 4).

The cutbacks have so far failed to push oil prices higher as traders remained unconvinced that the reduction will be fully carried out. Front-month spreads once again dipped into a bearish contango structure, indicating oversupply. BLOOMBERG