Saudi Oil Price Cut to Asia Linked to Market Share
From Trade Arabia
By Clyde Russell
Saudi Arabia’s decision to cut oil prices to Asia for March cargoes by more than expected shows that the kingdom is keen to keep market share and that the region’s demand is easing after winter.
By themselves, neither of these factors are a big surprise, but what was unexpected was the extent of the cut in Saudi Aramco’s official selling price (OSP).
The world’s largest oil exporter cut the OSP on its benchmark Arab Light grade to Asia to $1.95 a barrel above Oman/Dubai, down a sharp $1.50 from February’s $3.45 premium.
Traders surveyed by Reuters ahead of the February 5 announcement had expected a cut of $1 a barrel in the OSP, meaning the Saudis delivered a 50 percent bigger reduction than estimated.
This took the premium to the lowest since October last year, and was also the biggest cut since February last year.
This means for the second year in a row, a large increase in the OSP at the start of the year has been followed by an equally large drop.
In common with February last year, Asian refiners had felt the increase in the OSP for February 2013 cargoes had been overdone and wasn’t justified by market fundamentals.
This was especially the case since at the same time the Saudis were raising costs for Asian refiners, they were cutting them for European clients.
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