Several of the major Arabian Gulf oil producers have slashed their November prices for Asian buyers by more than usual, as competition in an oversupplied market heats up.
“Middle Eastern producers appear to have cut their official formula prices steeply for November-loading cargoes to Asia-Pacific in response to weakening prompt crude demand,” said Tom Reed, the editor at Argus China Petroleum, which tracks the market closely.
In one clear sign of stiffen- ing competition, Kuwait, Iraq and Iran all cut their official selling prices – expressed as a premium or discount to the benchmark Dubai crude price – by steeper amounts than Saudi Arabia.
The former trio usually move their prices by the same amount as Saudi, which is the world’s largest oil exporter.
Another sign of regional weakness is a steeper discount for near-term delivery versus delivery further out, said Mr Reed, who noted that Dubai futures front-month contract fell to a US$2.50 discount compared with delivery two months further out, the biggest discount since the start of the year.
“Chinese buying … which pushed prompt prices higher in August fell away in September, revealing otherwise weak demand for crude,” he said. Now, Chinese refiners are cutting their activity and the burgeoning “tea kettle” refiners – smaller, independent Chinese refiners – are finding cheaper, non-Middle East crude elsewhere.
The steeper discounting comes even as Saudi crude exports have fallen.
Figures released this week by the Joint Organisations Data Initiative showed that Saudi crude exports fell by 278,000 barrels per day in August, with more crude being diverted to the new refiners who are supplying growing domestic demand as well as exported refined petroleum products.
Nonetheless, Saudi production is well above 10 million bpd and exports were just a little below the 7 million bpd mark in August.
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