Saudi Aramco has lowered the pricing terms for Arab Light sold to Asia by the most in 10 months as refineries grapple with falling margins and oversupply.
The state-owned company said on Sunday it will sell cargoes of Arab Light in September at US$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.
Aramco’s pricing cut is part of a “market share battle” for Asian customers, particularly with the Opec rival Iran, which is boosting crude exports after sanctions eased in January, said John Kilduff, a partner at Again Capital in New York, on Sunday. Refineries in China “bought a lot of extra crude earlier this year when prices were lower, so they’re going to have to work that off”, he said.
Refineries from Singapore to China and South Korea are cutting operating rates amid a slump in margins and rising supply from state-owned giants such as China Petroleum and Chemical. In China, independent refiners are operating at less than half their capacity at a six-month low, according to data compiled from Oilchem.net.
Brent crude has climbed 14 per cent since the start of the year on supply disruptions from Nigeria to Canada. Prices are still 20 per cent lower in the past year. Saudi Arabia led the November 2014 decision by the Opec 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 north-west Europe and the Mediterranean.
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