Saudi Arabia has lowered its official selling prices for oil for all its Asian clients, with the flagship Arab Light for December delivery now priced $0.40 lower, Bloomberg reported, citing the slowdown across Asian economies.
The price cut is deeper than traders and refiners had expected, per a Bloomberg survey. Yet the final price remains considerably higher than it has been in previous years, with Arab Light at $5.45 per barrel above the Dubai/Oman benchmark.
At the same time, the Saudis raised the price of the oil they will be selling to Europe in December, even though that continent is no less threatened by a recession than Asia. Prices for the United States remained unchanged.
For Europe, Arab Light for December delivery would cost $1.70 over Brent, Reuters reported, and the Extra Light blend would cost $3.40 over Brent, with the price increase at $0.80 and $0.70, respectively.
This is bad news for most of Europe as the European Union embargo on Russian crude comes into effect on December 5. This means the EU’s oil import bill is set to swell at a time when it is already struggling with its gas import bill.
Asia is a priority market for the Saudis, with China, India, South Korea, and Japan its biggest buyers.
Meanwhile, relations with long-time friend and ally the United States have soured after the Biden administration slammed the Kingdom for approving a production cut across the OPEC+ group. The Saudis have maintained that it was a consensus decision and so have other OPEC+ members.
The decision, however, comes at a delicate time for oil prices, which have been oscillating between demand concern prompted by forecasts of a global economic slowdown and fears of a supply shortage. It was concern about demand that OPEC+ said motivated the decision to reduce production by 1 million bpd from December.