The Strategist

Saudi Arabia lowers oil prices to attract buyers

09/06/2021 - 11:27

Saudi Arabia has lowered oil prices for Asian buyers more than market participants expected. The country is trying to take market share from competitors, oil buyers said.

Andrew Fackler
Andrew Fackler
Saudi Arabia has lowered oil prices for buyers from Asia for the next month, Bloomberg said. The agency notes that the country's actions show its desire to attract buyers.

Saudi state-owned Saudi Aramco is lowering the price of Arab Light oil in Asia by $1.3 per barrel, Bloomberg points out. The price will be $1.7 higher than the cost of local oil, which acts as a benchmark. The company was expected to reduce the price by about 60 cents a barrel, the agency wrote, citing a survey of six traders and refiners from Asia last week.  

Saudi Arabia is trying to compete on prices and take market share from rivals, Saudi oil buyers from Asia told Bloomberg. Asia accounts for more than 60 percent of Saudi oil exports, the agency noted. The largest buyers are China, South Korea, Japan and India. 

Saudi Arabia supplies oil refineries under long-term contracts. However, because of the high prices set in previous months, traders switched from these contracts to trading on the spot market, UBS Group AG analyst Giovanni Staunovo told the agency. He cited the probable leveling of demand in Saudi Arabia's domestic market in the fall as another reason for lower prices. 

For Mediterranean buyers, Saudi Aramco is cutting prices for all types of oil by 10 cents a barrel, Bloomberg noted. For the U.S. and Northwest Europe, prices will remain unchanged.  

In July, the OPEC+ countries agreed in August to increase oil production by 400,000 bpd each month until the previously adopted limit of 5.8 million bpd is exhausted. This week, they agreed to maintain the previously approved plan.