Saudi Arabia has cut its official selling prices for crude oil in the latest sign that demand recovery is stumbling, Bloomberg reports, adding that this is the first time Riyadh has cut its oil prices to a discount against the benchmark since June.
Prices were lowered both for Asian and U.S. buyers this time, after Aramco kept its prices higher for U.S. refiners for six months in a row. For Asian buyers, this was the second consecutive month of price cuts, which suggests that the appetite for Saudi oil is dwindling after Chinese refiners spent the better part of the year stocking up on cheap crude amid the price crash and the pandemic.
In China, a key market, Saudi Arabia has been losing market share to its geopolitical partner, the United States, over the last few months. China has imported record volumes of crude oil in recent months, taking advantage of the lowest crude prices in two decades in April to stock up on dirt-cheap oil.
In their bargain-hunting for low-priced oil, Chinese state oil giants and independent refiners alike snapped up cheap U.S. cargoes in April, which were loaded in May, started to arrive in China in June, and set records in July.
Meanwhile, Saudi oil exports to the U.S. hit the lowest in more than three decades by August this year, down to an average daily of 177,000 bpd from some 1.3 million bpd in April. This month, Saudi oil imports into the U.S. are seen lower still, at some 264,000 bpd, which would be the lowest since 1985.
Just a month ago, Aramco’s chief executive said he was optimistic about the recovery of oil demand in Asia, seeing it almost back to pre-crisis levels. This followed earlier comments by Amin Nasser in June that the worst of the crisis was over, and the second half of the year would be much more robust in terms of oil demand than the first.
Based on the latest price adjustments, for shipments in October, this may not turn out to be the case.
By Irina Slav for Oilprice.com