Saudi Arabia May Cut Oil Prices for Asian Buyers Next Month

Saudi Arabia is reportedly considering a reduction in the official selling prices for most of its oil grades for Asian buyers next month, according to a Reuters report citing sources from the refining industry. A recent poll of six industry sources indicates that the Saudis could lower prices by between $0.30 and $0.50 per barrel in December, in response to trends in the Dubai benchmark price.

However, a price cut may not benefit the Saudis in terms of international prices. Such a move could signal weak demand, which might amplify bullish sentiment among traders and potentially lead to even lower prices overall.

Interestingly, some heavier oil grades might see smaller price cuts due to robust demand for high-sulfur fuel oil from the shipping sector. This demand has bolstered refining margins, encouraging refiners to maintain their appetite for heavier feedstock.

The poll forecasts the following discounts for December: up to $0.50 per barrel for Arab Extra Light, between $0.30 and $0.50 per barrel for Arab Light, and up to $0.40 per barrel for Arab Medium and Arab Heavy.

Bloomberg recently reported an increase in demand for high-sulfur fuel oil, as ships are taking longer routes to avoid Middle Eastern waters amid ongoing regional hostilities. Additionally, data shows the discount between high-sulfur fuel oil and the Singapore crude benchmark is narrowing, indicating stronger demand. This trend persists despite recent changes in International Maritime Organization fuel standards, which have allowed ships to install scrubbers that effectively remove sulfur pollutants from fuel during combustion.

Story via OilPrice.com