Saudi Arabia, the world’s largest oil exporter, is reportedly considering reducing crude oil prices for exports to Asian markets in June, even after OPEC Plus announced further cuts in oil production. Refineries affected by falling fuel prices are considering cutting production, while China and India are turning to Russia for cheaper crude oil.
According to reports, five Asian oil refineries said that Saudi Aramco, the Saudi state-run oil giant, may lower the official selling price (OSP) for Arab light crude by about 40 cents per barrel in the coming months, starting from June, following a price increase for three months.
Middle East crude oil prices have soared in the first half of April, after OPEC Plus, including Russia, announced a reduction in oil production by 1.16 million barrels per day since May, leading to concerns that the supply of Arab Light crude oil in Asia may tighten.
However, crude oil prices have dropped over the past two weeks due to lower oil product prices. Refining profits for Asian refineries using Middle Eastern crude hit a six-month low of $2.35/barrel on Friday, April 21, while profits for diesel were down 27% for the month and profits for gasoline were down 49%.
In addition, analysts also expect that China will issue new quotas for refined oil products soon, which will increase the oil supply in the market.
The move by Saudi Arabia to reduce crude oil prices for Asian markets is seen as an effort to maintain its market share in the face of stiff competition from Russia, which has been making inroads into the Asian market. This move may also lead to a price war in the Asian market, as other oil-producing countries may follow suit to protect their market share.