Oil prices gained marginally as the world’s top crude oil exporter, Saudi Arabia, on Thursday, cut the prices of all its crude grades loading for Asia in February to the lowest level to regional benchmarks in over a year, as demand concerns continue to prevail.
According to oilprice.com, Brent crude gained 0.69% to trade at $78.38 per barrel, while the American West Texas Intermediate (WTI), gained 0.56% to trade at $73.25 per barrel as at the time of this report.
The state-controlled Saudi Aramco slashed the official selling price (OSPs) of its flagship crude grade, Arab Light, to its main in Asia and Europe for February by $1.45 per barrel, setting the price at $1.80 a barrel above the Dubai/Oman benchmark.
The premium to the Dubai/Oman average is the lowest since November 2021, but it was generally in line with expectations.
Oil demand remains a concern
The cut in oil prices appears to be a signal that demand remains sluggish as coronavirus cases in China surge. Crude also was restrained as equities fell and the dollar strengthened after a strong US labour report fuelled speculation that interest rates have more room to rise.
A Reuters survey of analysts earlier in the week showed that Saudi Aramco was widely expected to cut its OSPs to Asia for February, following a cut for the January loadings to a 10-month-low.
Last month, Saudi Arabia cut the price of the crude it would sell to Asia in January to a 10-month low versus the regional benchmarks, which had weakened amid signs of lackluster demand in the world’s most important oil-importing market.
The forecasts in the Reuters survey were in line with the actual cut announced today with analysts suggesting that the price of the Arab Light crude grade is expected to be cut by $1.50 per barrel for February shipments to a premium of just $1.75 per barrel over Dubai/Oman.
Aramco, which generally doesn’t comment on the OSPs, also lowered the prices of its crude loading in February to northwest Europe and the Mediterranean region, while prices for the U.S. remained unchanged.
The cut in Saudi oil prices isn’t a surprise for the market or analysts, considering the growing concerns about immediate demand in China and the world.
Oil in a gloomy start beginning of the year
Oil prices had the worst start to a year in more than 30 years after tumbling by 9% in just 2 days.
Crude is off to a gloomy start to the year with futures curves continuing to signal a market that is oversupplied. At the same time, the oil market is also faced with lower levels of participation.
The industry-funded API reported US commercial crude stockpiles expanded by 3.3 million barrels last week, according to people familiar with the figures. Gasoline inventories also increased, but supplies of distillates — a category that includes diesel.