(MENAFN- Gulf Times) Saudi Arabia cut pricing for November oil sales to Asia and the US as the world's largest crude exporter seeks to keep its barrels competitive with rival suppliers amid sluggish demand.
Saudi Arabian Oil Co reduced its official selling price for Medium grade crude to Asia next month to a discount of $3.20 a barrel below the regional benchmark, compared with a $1.30 discount for October sales, the company said yesterday in an e-mailed statement. The discount for the Medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a $2 a barrel cut in February 2012, according to data compiled by Bloomberg.
Brent crude, a global benchmark, tumbled almost 50% last year as Saudi Arabia and other Opec members chose to protect market share instead of decreasing output to boost prices. Brent fell from more than $100 a barrel in July 2014 to less than half that amount six months later and traded below $50 a barrel on average in September.
"They needed to cut pricing to keep Saudi crude competitive with other grades," Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by phone. "Demand has been a bit weaker, leading to the cuts."
Saudi Arabia will continue investing in oil production even amid the low prices, Ali al-Naimi, the country's oil minister said in a speech in Istanbul, in comments reported by state-run Saudi Press Agency on Friday. Volatile oil prices affect investments, creating a situation that's not good for producers or consumers, he said.
"We have to do the right thing," al-Naimi said in an interview published yesterday in India's The Economic Times. "The right thing is keep focused on demand and supply." Commercially viable producers "will continue to prevail," and the Organisation of Petroleum Exporting Countries will increase its market share, he said.
Saudi Aramco, as the producer is known, widened the discount for Arab Light crude to Asia by $1.70 a barrel to $1.60 a barrel less than the benchmark, according to the statement. The cut was smaller than the median estimate of a $1.90 a-barrel reduction expected by seven refiners and traders in Asia surveyed by Bloomberg last week. The decrease was the deepest since January.
The company trimmed November pricing for its Light, Medium and Heavy grades to the US by 30 cents a barrel each. Medium crude will sell at a discount of 85 cents a barrel to the regional benchmark, the widest since March.
The company raised price levels for the same three grades for buyers in Northwest Europe. It trimmed pricing on Light, Medium and Heavy sold to the Mediterranean region.
Opec, of which Saudi Arabia is the largest producer, decided in December and again in June to keep its production target unchanged at 30mn bpd. The group has exceeded this official target every month since May 2014.
Saudi Arabia boosted output to a record 10.48mn bpd in June, according to the International Energy Agency. The kingdom pumped 10.3mn barrels daily last month as it exited its peak summer period for domestic demand, data compiled by Bloomberg show.
Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia. Producers in the Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf's state oil companies price their crude at a premium or discount to a benchmark.
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