Saudi Arabia is preparing to significantly reduce its official selling prices for crude oil destined for Asian markets in July, as weakening demand and falling benchmark premiums squeeze the market.
The world’s top crude exporter is expected to cut the official selling price for its flagship Arab Light crude loading for Asia in July by between $3 and $8 per barrel compared to June levels.
That reduction would bring the Arab Light premium to somewhere between $7.50 and $12.50 a barrel over the average Oman/Dubai prices, the key benchmark for Middle Eastern crude, according to a Reuters survey of industry sources.
The anticipated cut marks the second consecutive major reduction in Saudi pricing after the Kingdom set a record-high premium of $19.50 a barrel for Asian loadings in May, announced in early April.
For June loadings, Arab Light crude was priced at $15.50 per barrel above the Oman/Dubai average, already representing a $4 per barrel reduction from that record May premium.
The cash Dubai premium to swaps has averaged $8.90 per barrel so far in May, a sharp decline from an average premium of $13.92 a barrel recorded in April, according to Reuters data.
The spot premium for Oman crude has also slid during May, further signaling tepid demand across Asian spot markets and reinforcing expectations for another round of price reductions.
Brent crude prices have also fallen below the $100 per barrel mark this week, trading at $93 in Asian markets on Friday, partly on hopes that the United States and Iran could reach a nuclear deal.
Lower Brent prices reduce the competitive pressure on Saudi Arabia to maintain elevated premiums, giving the Kingdom added justification to align its official selling prices more closely with current market realities.
Beyond Arab Light, the broader Asian industry expects Saudi Arabia to apply similar cuts across all other Saudi crude grades, consistent with the pricing direction signaled by the Arab Light adjustment, per the Reuters survey.
Saudi Arabia typically announces its crude pricing around the fifth of each month for the following month’s loadings, and the Kingdom does not publicly comment on changes to its official selling prices.
The back-to-back price reductions reflect a notable cooling in Asian crude demand following what had been an exceptionally strong run of buying earlier in the year, when supply concerns had driven premiums to historic levels.
