December 6, 2016 / 5:10 PM / 2 years ago

Saudi Arabia cuts January oil price to Asia to four-month low to keep market share

NEW YORK/SINGAPORE (Reuters) - Saudi Aramco has cut the January price for its Arab Light crude for Asian customers to the lowest in four months as it holds to a strategy of preserving market share in the world’s fastest-growing demand center.

Shaybah oilfield complex is seen at night in the Rub' al-Khali desert, Saudi Arabia, November 14, 2007. REUTERS/Ali Jarekji/File Photo

The price cuts are meant to ensure that Aramco can still sell more oil into Asia even after going along with the OPEC-Russia deal to cut output. The Saudis have been struggling over the last two years to fight off increased competition from other producers in the Middle East, Russia and the Atlantic Basin.

Saudi Aramco said on Tuesday it cut the price of Arab Light crude sales to Asia by $1.20 a barrel versus December to a discount of $0.75 a barrel to the Oman/Dubai average.

January’s price cuts of $0.60-$1.50 across all Saudi crude grades are small compared with a near $10 a barrel gain in global benchmark Brent futures in the past week. Brent hit 16-month high on Monday after OPEC and Russia struck a deal last week to cut production from January. [O/R]

“Ahead of the OPEC cut, producers are pumping at maximum output, so they must price to sell,” said a trader with a North Asian refiner who declined to be named due to company policy.

Russian oil production hit an all time high in November, according to official energy ministry data, while a Reuters survey found that output from the Organization of the Petroleum Exporting Countries (OPEC) was also at a record for the month.

Prior to the OPEC output deal, Saudi Aramco agreed to supply some customers in Asia with additional oil that will load in January to help them meet winter demand.

EUROPE PRICE HIKE

The company raised its Arab Light OSP to Northwest Europe by $0.30 a barrel for January from the previous month at a discount of $4.20 a barrel to the Brent Weighted Average (BWAVE).

The Arab Light OSP to the United States was set at a premium of $0.05 a barrel to the Argus Sour Crude Index (ASCI) for January, down $0.30 a barrel from the previous month.

Because the Brent to Dubai Arab Light prompt month spread rose to $3.15 a barrel from $2.55 after the OPEC deal, Saudi Arabia had more leeway to raise their OSPs to Europe and remain competitive, said Jeff Quigley, Energy Markets Director at Stratas Advisors, a Houston-based consultancy.

“They are trying to capitalize on the OPEC deal-driven price increase in Europe while not losing market share in Asia,” Quigley said.

The tables below show the full FOB prices for January in U.S. dollars. Saudi term crude supplies to the United States are priced as a differential to the Argus Sour Crude Index (ASCI).

United States

EXTRA LIGHT +1.90 +1.80 +0.10

LIGHT +0.05 +0.35 -0.30

MEDIUM -1.15 -1.05 -0.10

HEAVY -2.35 -2.25 -0.10

Prices at Ras Tanura destined for Northwest Europe are set against Brent crude weighted average (BWAVE):

JANUARY DECEMBER CHANGE

EXTRA LIGHT -2.40 -2.60 +0.20

LIGHT -4.20 -4.50 +0.30

MEDIUM -5.10 -5.60 +0.50

HEAVY -6.70 -7.50 +0.80

Saudi term crude supplies to Asia are priced as a differential to the Oman/Dubai average:

JANUARY DECEMBER CHANGE

SUPER LIGHT +3.05 +4.55 -1.50

EXTRA LIGHT +0.65 +1.85 -1.20

LIGHT -0.75 +0.45 -1.20

MEDIUM -1.40 -0.40 -1.00

HEAVY -3.30 -2.70 -0.60

Prices at Ras Tanura for Saudi oil destined for the

Mediterranean are set against the BWAVE:

JANUARY DECEMBER CHANGE

EXTRA LIGHT -2.00 -2.70 +0.70

LIGHT -4.10 -4.60 +0.50

MEDIUM -5.10 -5.60 +0.50

HEAVY -6.70 -7.40 +0.70

Reporting By Jessica Resnick-Ault in NEW YORK and Florence Tan in SINGAPORE; Editing by Alan Crosby and Tom Hogue

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