Saudi Arabia cuts oil prices for Asian and European customers

(Patria) - Saudi Arabia has lowered oil prices for its main markets in Asia and Europe, signaling that demand remains slow as economies slow down and the number of COVID-19 cases in China rises, writes Bloomberg.

Brent crude futures have fallen from nearly $125 a barrel in June to less than $80, with prices down another 7.5 percent this week. High interest rates and a strong dollar have weakened energy consumption among businesses in the US, Europe, and China. Kristalina Georgieva, head of the International Monetary Fund, said this week that she expects one-third of the global economy to enter recession this year.

State-controlled Saudi company Aramco has cut prices for all types of crude oil to be delivered to Asia in February. The company's flagship product, Arab Light, has been lowered to $1.80 a barrel above the regional benchmark, a $1.45 reduction from this month's price. It is now at its lowest level since November 2021.

Aramco has also cut prices for deliveries to northwestern Europe and the Mediterranean region. It has maintained the same prices for US customers.

Saudi Arabia sells about 60 percent of its crude oil exports to Asia under long-term contracts, with prices reviewed monthly. China, Japan, South Korea, and India are the largest buyers. Riyadh's moves are closely watched by other Gulf producers such as Iraq and Kuwait.

Many oil traders expect prices to rise in the second quarter as China's COVID-19 epidemic subsides and potentially as Russian supplies decline due to sanctions related to its invasion of Ukraine.

Last month, OPEC+, the producers' cartel led by Saudi Arabia and Russia, decided to keep crude oil production stable after cutting it by 2 million barrels a day in October. The group is scheduled to meet in June, although it may meet earlier if prices continue to fall.