Important news from the Middle East, Saudi Arabia announced that it has reduced the selling price of oil to customers in Asia. Inevitably, the gesture will have global consequences.
Saudi Arabia, the world’s largest oil exporter, has shrunk everyone’s prices oil prices to Asian customers in October compared to September. In northwestern Europe and the United States, prices have remained the same for the time being.
Deep price cuts come as a result of the “lockdowns” that have taken place in much of Asia to combat the delta version of coronavirus. The restrictions imposed by the authorities also had the effect of lowering the demand for fuel in the region.
However, oil stocks, globally, are growing.
Impact on demand
Saudi Aramco has lowered the official selling price of Arab Light crude oil to the Asian market for the first time in four months, according to a company pricing document. On the other hand, the Saudis did not go for the price of light crude oil for northwestern Europe and the United States.
Deep price cuts are likely to increase demand for Saudi oil, Asian oil traders said, encouraging buyers to nominate full volumes for October.
“The request is provisional. If they go that route, they will reverse much of the normalization of stocks made in the last 12-18 months, “said Virendra Chauhan, Energy Aspects analyst. The price reductions announced by Aramco indicate “a weaker demand and an offer with greater potential”, the analyst added.
The world supply of oil is growing, as the Organization of the Petroleum Exporting Countries and its allies announced an increase in joint production of 400,000 barrels per day between August and December.
“Given that OPEC + continues its monthly production growth plan, despite weak data from China and the US, which raises fears of slowing economic growth, and Saudi Arabia seeks to gain market share in the region, oil is likely to remain “under pressure”, commented Jeffrey Halley, senior market analyst for Asia-Pacific at the OANDA brokerage house.
In other words, the situation is volatile and even if we have reason to rejoice, these sudden changes can have a devastating impact on the global market. For the moment, we are obliged to live in the era of the pandemic that makes its presence felt in all areas. A possible price reduction for Europeans and Americans would be seen as a massive stimulus for the economy, but for now there is no question of such a thing. Thus, all that remains for us to do is to hope that both Europe and the United States will not face harsh restrictions as is the case in Asia.
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