SINGAPORE: Top oil exporter Saudi Arabia may cut prices for most of the crude grades it sells to Asia in May to track weak demand in the region, trade sources said on Friday.
The producer could cut the official selling price (OSP) for flagship Arab Light crude by 10-40 cents a barrel in May from a month ago, a Reuters survey of four refiners in Asia showed.
“I’m seeing price reductions across the board,” one of the survey respondents said.
Crude supplies in Asia remained abundant despite production cuts by the Organization of the Petroleum Exporting Countries and other suppliers as several Asian refiners are shut for seasonal maintenance.
The Middle East supply cuts and increasing US shale output have made it economical for traders to send huge volumes of oil from west to east, reducing buyers’ appetite for spot Middle East crude.
“The spot market is weak. Almost every type of crude is sold at discount against its OSP,” a second survey respondent said.
Among the Saudi grades, Arab Light and Arab Extra Light prices could drop by a bigger margin than medium-heavy grades given that the market surplus is mainly light oil, the sources said.
Asian refiners have snapped up light crude from Russia and the United States after prices dropped, but traders said supplies remained abundant.Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.
State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.
Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.