In an effort to entice buyers into more sales, Saudi Arabia has decided to decrease the prices for oil sales to Asia over the next month. This comes after three months of constant price hikes on all grades in the Asian market.
The price decrease comes after the OPEC+ decided to raise production, particularly after forecasting an oil shortage near the end of the year. As a result of the decrease, Saudi Arabia will be able to compete for the business of more cautious buyers.
Because Saudi Arabia sells most of its oil on long-term contracts to refiners, setting a steeper price could result in the alienation of a large portion of its target market.
Giovanni Staunovo, a commodities analyst at UBS Group AG, remarked that many customers who are unwilling to pay such steep prices have foregone long-term contracts in favor of impulse purchases. “With domestic demand likely leveling off in autumn, they have more barrels to be exported, so that’s another reason to offer more attractive OSPs,” Staunovo continued.
Saudi Aramco is to lower the price of its Arab Light crude by $1.30 per barrel. Aramco is also expected to lower the oil selling price of the grade by around 60 cents a barrel.
