Saudi Arabia, the world’s top oil exporter, cut the January official selling price (OSP) for its flagship Arab Light crude for Asian buyers to a 10-month low, on concerns over faltering demand and a potential increase in Russian competition.
The OSP for January-loading Arab Light to Asia was trimmed by $2.20 a barrel from December to $3.25 a barrel over Oman/Dubai quotes, state oil producer Saudi Aramco said on Monday.
The new OSP is just above the previous low of $2.80 per barrel, set for March 2022.
The change was in line with market forecasts for a cut of about $2 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, on Sunday decided to keep unchanged their plan to cut production.
The backwardation in the Dubai market structure narrowed during trading last month, implying that fears over near-term supply tightness for crude were easing.
The premium for front-month Dubai over the price for the third-month averaged $2.76 a barrel in November, down from $4.73 in October.
Saudi Arabia’s OSP adjustment also came after the Group of Seven (G7) nations and Australia agreed to a $60 per barrel price cap on Russian seaborne crude oil.
“Although the market remains cautious on lifting Russian crude as the price cap is just set, there is no doubt that more cargoes will flow to Asia and compete with the Middle Eastern crude,” said a Singapore-based trader.
Saudi Arabia cut its January Arab Light OSP to northwest Europe by $1.80 a barrel from December and kept the price to the United States unchanged.
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