Saudi Arabia cut oil prices for buyers in Asia as coronavirus lockdowns in China weigh on demand, countering uncertainty around Russia’s supplies as the Ukraine war drags on.
Aramco is expected to cut the official selling price (OSP) for flagship Arab Light crude to Asia in June by more than 50 percent.
The state-controlled company dropped its key Arab Light crude grade for next month’s shipments to Asia to $4.40 a barrel above the benchmark it uses, from $9.35 in May.
Saudi Arabia raised its prices to record levels in the past two months after crude futures surged above $100 a barrel when Russia invaded Ukraine. Russian flows have already fallen and may drop further as the European Union moves closer to formally sanctioning energy supplies from the country.
While the war has tightened the global oil market, Beijing’s Covid Zero strategy has led to China’s largest demand shock since the early days of the pandemic.
Saudi Arabia sends more than 60 percent of its crude exports to Asia, with China, Japan, South Korea and India being the biggest buyers.
Oil prices rose nearly 1.5% on Friday, posting a second straight weekly increase.
Brent futures rose $1.49, or 1.3 percent, to settle at $112.39 per barrel. US West Texas Intermediate (WTI) crude climbed $1.51, or 1.4 percent, to end at $109.77 a barrel.
For the week, WTI gained about 5%, while Brent nearly 4% after the EU set out an embargo on Russian oil as part of its toughest-yet package of sanctions over the conflict in Ukraine.
The EU is tweaking its sanctions plan, hoping to win over reluctant states and secure the needed unanimous backing from the 27 member countries, three EU sources told Reuters. The initial proposal called for an end to EU imports of Russian crude and oil products by the end of this year.
Russia’s exports of crude and oil products have probably dropped by around 1 million barrels a day from 7.5 million before the attack in late February, Mike Muller, head of Asia at Vitol Group, said Sunday on a podcast produced by Dubai-based Gulf Intelligence. They could fall further after May 15, he said.
There will be a “different reality” even for companies that have until now kept up Russian energy purchases because they have contractual obligations to fulfill, he said.
Geneva-based Vitol, which traded 7.6 million barrels of crude and refined oil a day in 2021, said last month that it intends to stop dealing in Russian-origin products by the end of this year.