(Bloomberg) -- Saudi Arabia cut August pricing for most of its crude grades to Asia as the world's largest oil exporter seeks to stay competitive with other producers.
State-owned Saudi Arabian Oil Co., known as Saudi Aramco, lowered official pricing for Arab Light crude to Asia by 20 cents to 45 cents a barrel below the regional benchmark, it said in an emailed statement. The company had been expected to cut pricing by that amount, according to the median estimate in a Bloomberg survey of five refiners and traders.
Crude futures have declined 14 percent this year, entering a bear market in June amid concerns that rising global supply will outweigh production cuts from the Organization of Petroleum Exporting Countries and partners including Russia. The spread between Dubai crude and Brent, the global benchmark, declined 23 percent in June, making Middle Eastern crude more expensive for Asian buyers relative to barrels linked to the European grade.
By cutting all but one of its its official selling prices for Asian clients, Saudi Arabia will make its crude more competitive. The only increase was for Arab Heavy, by 10 cents to $1.75 a barrel below the benchmark. The company cut pricing on all other grades to the region.
Aramco raised pricing on all grades to Northwest Europe and the Mediterranean region, while leaving pricing for most crudes to the U.S. unchanged. In the only change for U.S. buyers, the company reduced the premium for Arab Extra Light by 10 cents for August.
Pricing for buyers in Asia was higher for July-loading crude, as Aramco sought to take advantage of higher demand after global suppliers extended production cuts to help curb a supply glut. The increase for July sales was Aramco's first in four months.
Middle Eastern producers compete with cargoes from Latin America, North Africa and Russia for buyers in Asia, the largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf's state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.
--With assistance from Sharon Cho and Serene Cheong
To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net.
To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley, Alaric Nightingale
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