Saudi slashes monthly oil prices to Europe; trims U.S., ups Asia

Mon Jan 5, 2015 2:14pm EST
 
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NEW YORK (Reuters) - Saudi Arabia made deep cuts to its monthly oil prices for European buyers on Monday, a move some analysts said reflects the kingdom's deepening defense of market share, although it also hiked prices in Asia from record lows.

State oil firm Saudi Aramco cut the official selling price (OSP) for its Arab Light crude to Northwest Europe, a region that buys only a small proportion of Saudi Arabia's crude, by $1.50 a barrel for February, putting it at a discount of $4.65 a barrel to the Brent Weighted Average (BWAVE), the lowest since 2009.

However, Aramco also raised its February price for its Arab Light grade ARL-OSP-A for customers for Asia - the largest of its major markets, accounting for more than half of its exported crude - by 60 cents a barrel versus January to a discount of $1.40 a barrel to the Oman/Dubai average.

The $2 discount to Asia in January was the largest in records going back more than a decade, but traders had been expecting Aramco to hike prices by at least 20 to 30 cents due to the narrowing spread in the Dubai market.

The Arab Light OSP to the United States, the fifth consecutive monthly cut, was set at a premium of 30 cents a barrel to the Argus Sour Crude Index (ASCI) for February, down 60 cents from the previous month.

The Kingdom's move to cut its OSPs has been perceived by many traders as a signal of its decision to abandon efforts to shore up falling crude oil prices and, instead, focus on maintaining its share of key markets.

“The moves are reinforcing that the Saudis just don’t intend to do anything to rebalance (price) levels," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

Benchmark Brent oil prices LCOc1 held on to earlier deep losses following the publication of the Saudi OSPs on Monday, trading at around $53.50 a barrel, down $3 on the day.

Some analysts, however, have said they see the changes in monthly differentials as a simple reflection of deteriorating market conditions, not an indicator of policy.   Continued...

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