Saudi Arabia lowers prices of some petroleum products
According to Reuters, on January 7th local time, Saudi Aramco lowered some oil product prices.
The flagship product of Saudi Aramco, "Arab Light Crude Oil," lowered its price in Asia by $2 in February, which is $1.5 higher than the base price per barrel and the lowest price since November 2021. Previously, traders surveyed by the media estimated a price reduction of $1.25 per barrel.
In addition, Saudi Aramco has also lowered the prices of products delivered to Northwest Europe, the Mediterranean, and North America in February. Saudi Aramco's crude oil pricing is the benchmark for Middle Eastern oil producing countries. According to convention, other major Middle Eastern oil producing countries such as Kuwait and Iraq typically follow Saudi Aramco's pricing.
This price reduction is not only affected by supply and demand, but also a normal seasonal adjustment. Oil consumption usually slows down in February and March, and refineries use this time to close some facilities for regular maintenance.
According to reports, Saudi Arabia has lowered the prices of key crude oil sold to Asia by more than expected, which has strengthened the market's perception of the softness of the crude oil spot market in this largest crude oil consumption region. Traders currently anticipate that the growth in crude oil demand will slow down. Refiners and traders have stated that Saudi Arabia's pricing has been lowered in sync with the spot market, which may increase the profit margins of refiners using Saudi crude oil as their refining raw material. However, at least three Asian buyers have stated that the drop in oil prices is unlikely to lead to Saudi Arabia's demand for increased delivery, as there are still cheaper and competitive crude oil supplies in the spot market.
In 2023, due to the expansion of crude oil production in non OPEC producing countries, crude oil prices experienced their first annual decline since 2020. The decline in crude oil prices has prompted Saudi Arabia to voluntarily reduce production significantly, and other OPEC+member countries have also taken corresponding measures to reduce production.
On November 30, 2023, the OPEC Secretariat issued a statement stating that multiple OPEC and non OPEC oil producing countries will continue to voluntarily reduce production in the first quarter of this year, with a total daily reduction of 2.2 million barrels. On that day, the 36th ministerial meeting of OPEC+was held via video. The statement released that evening stated that the production reduction will be based on the 2024 production targets set by the 35th OPEC+Ministerial Conference in June 2023, and is an additional reduction in production following the voluntary production reduction measures announced by major oil producing countries in April 2023.
According to the statement, Saudi Arabia will extend the voluntary daily production reduction of 1 million barrels starting from July 2023 until the end of March this year. In the first quarter of this year, Russia increased its voluntary daily production reduction of 300000 barrels from September 2023 to 500000 barrels per day. OPEC+members such as Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman also voluntarily reduced production in the first quarter of this year.