Saudi Arabia cuts oil prices for main market as demand slows

Saudi Arabia cut oil prices for Asia, signalling that demand in its main market remains sluggish, as economies slow and coronavirus cases in China surge.

Brent crude futures have slumped from almost $125 a barrel in June to less than $80, with prices dropping 7.5 per cent this week. High-interest rates and a strong dollar have hit demand in the US, Europe and China. Kristalina Georgieva, the head of the International Monetary Fund, this week said she expected one-third of the global economy to enter a recession this year.

State-controlled Saudi Aramco reduced prices for all types of crude that will be shipped to Asia in February. The company’s flagship Arab Light grade was lowered to $1.80 a barrel above the regional benchmark, $1.45 less than the price for this month. That was roughly in line with a Bloomberg survey of traders and refiners.

Aramco also reduced prices for shipments to the Mediterranean region.

China reopening

Still, many oil traders expect prices to rebound in the second quarter as China’s Covid outbreak eases and, potentially, Russian supplies drop due to sanctions.

In December 2022, OPEC+, an oil-producers network led by Saudi Arabia and Russia, decided to keep output steady after lowering production by 2 million barrels a day in October.

The group is scheduled to meet next in June, though it could convene sooner if prices swing substantially.

Saudi Arabia sells most of its oil under long-term contracts to Asia, pricing for which is reviewed each month. China, Japan, South Korea and India are the biggest buyers. The price moves tend to be closely followed by other Arabian Gulf producers including Iraq and Kuwait.