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Business News/ Market / Stock-market-news/  Saudi Arabia cuts oil price to Asia as battle with Iran heats up
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Saudi Arabia cuts oil price to Asia as battle with Iran heats up

The biggest cut was by $1.60 for Extra Light crude

Pricing for Light and Extra Light grades for US clients was cut, by 20 cents and 40 cents, respectively, while the Medium and Heavy grades were unchanged. Photo: AFPPremium
Pricing for Light and Extra Light grades for US clients was cut, by 20 cents and 40 cents, respectively, while the Medium and Heavy grades were unchanged. Photo: AFP

Dubai: Saudi Aramco, the world’s largest oil exporter, lowered the pricing terms for Arab Light crude sold to Asia by the most in 10 months, signalling Saudi Arabia has no plans to back down while Opec (Organisation of the Petroleum Exporting Countries) rival Iran tries to regain market share amid a global oversupply.

State-owned Saudi Arabian Oil Co. said Sunday it will sell cargoes of Arab Light in September at $1.10 a barrel below Asia’s regional benchmark. That is a pricing cut of $1.30 from August, the biggest drop since November, according to data compiled by Bloomberg. The company was expected to lower the pricing by $1 a barrel, according to the median estimate in a Bloomberg survey of eight refiners and traders.

Iran has boosted crude production 25% this year and aims to reach an eight-year high for daily output of 4 million barrels by the end of the year. Customers in Asia account for the largest share of Iran’s new sales, according to shipping data. The nation dropped to fourth-biggest Opec producer after international sanctions that restricted its supplies in 2012. It has since returned to third place after the sanctions were eased in January. Saudi Arabia has responded by boosting its crude and refined products exports.

“The market share battle between them and Iran is back on in a big way," John Kilduff, partner at Again Capital Llc in New York, said by phone on Sunday. “This is a throwdown challenge that I’m sure the Iranians will match."

Asian demand for crude is stalling as refineries from Singapore to China and South Korea are cutting operating rates amid a slump in margins and rising supply from state-owned giants, which can draw on large crude inventories that have built up over the past two years of low prices.

Oil prices

Brent crude has climbed 17% since the start of the year on supply disruptions from Nigeria to Canada. Prices are still 12% lower in the past year. Saudi Arabia led the November 2014 decision by the Organisation of Petroleum Exporting Countries to maintain production levels to drive out higher-cost producers.

All other official selling prices for Asian clients were reduced. The biggest cut was by $1.60 for Extra Light crude. Pricing for Light and Extra Light grades for US clients was cut, by 20 cents and 40 cents, respectively, while the Medium and Heavy grades were unchanged. Aramco raised the pricing of all grades except Extra Light to northwest Europe and the Mediterranean. Bloomberg

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Published: 01 Aug 2016, 03:10 PM IST
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