In a move to support its key Asian market, Saudi Arabia has reduced the official selling price (OSP) of its flagship Arab Light crude oil grade for July delivery. The document seen by Reuters shows that the OSP for Arab Light crude sold to Asia has been set at plus $2.40 versus the Oman/Dubai average, a 50-cent per barrel cut from the June levels.
The price cuts extend to other Saudi crude grades sold to Asian customers, ranging from 40 to 60 cents per barrel. This decision by state oil giant Saudi Aramco underscores the pressure faced by OPEC producers amid falling Middle East crude benchmarks and weaker profit margins for Asian refiners.
The reduction in Saudi OSPs, which account for 82% of the kingdom’s oil exports, comes as OPEC agreed to extend most of its deep output cuts well into 2025 at its meeting on June 2. The move is aimed at shoring up the market against tepid demand growth and high U.S. production.
In contrast, the OSPs for Arab Light crude sold to Northwest Europe and the Mediterranean were raised by $1 per barrel, reflecting the different market dynamics in those regions. The prices for U.S. buyers, however, remained unchanged from June levels.
Aramco sets its crude prices based on recommendations from customers and the change in the value of its oil over the past month, taking into account factors such as yields and product prices. These OSP adjustments set the trend for pricing of other Persian Gulf producers’ crude, affecting around 9 million barrels per day of oil bound for Asia.
The price cut for Saudi’s key Asian market underscores the need for OPEC producers to be responsive to shifting market conditions and adjust their strategies accordingly to maintain their competitiveness and support global oil demand.