Saudis Cut Prices On Most Crudes As OPEC+ Ramps Up Output

Saudi Arabia will cut prices on all of its crude grades for buyers in Asia for next month as well as on most barrels to other regions after OPEC+ said it will continue to ramp up output, defying widespread expectations of a looming oversupply. 

State producer Saudi Aramco is lowering the price for its flagship Arab Light crude to its biggest market by $1 a barrel for shipments in October, according to a price list seen by Bloomberg. The grade will sell for a premium of $2.20 a barrel to the regional benchmark next month, lower than expected by refiners and traders.

The company was expected to decrease the price by 50 cents a barrel, according to a survey of refiners and traders.

Saudi Arabia and its allies in the Organization of the Petroleum Exporting Countries agreed over the weekend to press on with raising production further, following accelerated hikes during the past few months. The alliance is seeking to reclaim market share it had ceded to rivals, and in the process may be breaking with its traditional aim of defending crude prices.

Aramco also is cutting prices on all of its crude grades to Europe by 80 cents a barrel and lowering most of the barrels set for the US next month. The only grade unchanged is Arab Light to the US, which is set at a premium of $4.20 a barrel in October, flat to September.

The larger-than-expected price cut for Asia is surprising and sends a potentially bearish signal, according to traders dealing in oil in that region. Aramco’s crude marketers are currently meeting refiners and traders at Asia’s largest energy gathering in Singapore, where they are likely discussing contract volumes for the coming year.

Aramco previously raised Asia’s prices for August and September in the face of bigger OPEC+ quota hikes, indicating confidence that summer demand remained strong. That flush market may begin to wane as added supply comes online.

Crude in London has slipped about 12% this year to trade near $66 a barrel. UBS Group AG sees prices dipping to $62 a barrel by year’s end, while Goldman Sachs Group Inc. anticipates a drop to the low $50s next year.

Still, the OPEC+ supply increases during the past few months haven’t yet caused a buildup of inventories in the West, where the world’s key oil-price benchmarks are located.

The decrease in Aramco’s selling prices after two consecutive months of hikes for buyers in Asia may come as a relief for refiners fretting about the potential for weakening margins amid a potential oversupply.

Healthy summer demand supported by travel in the US and Europe, and domestic needs in the Middle East propped up prices in the past months, though that’s set to wane as winter approaches.