Gulf oil producers are in a race to offer discounts to entice buyers, with Saudi Arabia’s latest price cut for Asian importers the sharpest in decades but unlikely to boost sales.
Saudi Arabia yesterday cut its official selling price for crude to Asian buyers by as much as $11 per barrel, Reuters reported, but other Gulf exporters are cutting even deeper in order to sell their barrels that have sat in the Gulf for over three months.
“The sharp month-on-month cuts to Saudi term OSPs came as little surprise, with competing Middle Eastern spot grades trading at even deeper discounts,” Vortexa analyst Emma Li said, as quoted by the publication. After the latest cut, Saudi’s flagship Arab Light is trading at $1.50 below the Dubai/Oman average.
The analyst noted weaker Asian demand and the availability of temporarily unsanctioned Iranian barrels, which further intensify the competition among Gulf exporters.
“Weak Asian demand, especially from China, together with the sanctions waiver on Iranian crude, has intensified competition among sellers and shifted the market in buyers’ favour,” Li also said.
Iran is wasting no time in returning full steam to the oil export market after the Islamic Republic and the United States agreed in mid-June on a 60-day window to negotiate a deal, during which sanctions on Iranian crude would be lifted.
Since the memorandum of understanding was signed and the U.S. blockade aimed at preventing Iranian oil exports was lifted, Tehran has exported millions of barrels of its oil and has probably raised more revenues from these sales as the discounts of the Iranian crude to benchmarks have narrowed.
Meanwhile, Saudi oil prices hit record highs in May, Reuters noted in its report, as traffic in the Strait of Hormuz remained paralyzed and despite Saudi Arabia’s alternative export route via the Red Sea port of Yanbu—hence the deep price cuts since then, which may not be the last ones amid the intense competition among sellers.
By Irina Slav for Oilprice.com
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