RIYADH: Saudi Arabia’s decision to raise the price of the oil it sells in Asia this month may prove costly as Chinese demand weakens amid a resurgence in coronavirus cases and the US and Russia seek to undercut the Kingdom’s product with cheaper alternatives, Bloomberg reported.
Saudi Aramco raised its Arab Medium and Heavy grades by 20 to 30 cents a barrel to the highest in at least four months for September sales to the region, but demand for these may suffer as China battles an outbreak of the highly infectious Covid-19 strain.
Brent’s premium to Dubai oil was at $3.38 a barrel as of early Friday, compared with $4.36 a month earlier.
Also, US varieties, such as Mars, which is of a comparable medium quality, are being offered at rates that are lower than last month, while Russia’s Urals is also becoming cheaper, according to traders who buy and sell those barrels, which could lead to Asian refiners to buy lower amounts of contracted volumes from Aramco.
Nominations were due Thursday and Aramco will likely notify buyers of their allocations next week, Bloomberg said.
Cargoes of some Middle Eastern medium and heavy-sour crudes have been falling to discounts against their official selling prices.
The market is also starting to see prompt cargoes offered as the OPEC+ restores more production.
OPEC+, the oil-producers’ group led by the Saudis and Russia, agreed last month to ramp up production over the rest of the year.
While most analysts still see the market facing a shortage of barrels amid a global economic recovery from the worst of the pandemic, the emergence of the more contagious Delta variant poses a risk to demand that is keeping many producers, particularly international oil companies, reticent to open the gushers just yet.
Saudi Arabia sends more than 60 percent of its crude exports to Asia, with China, South Korea, Japan and India the biggest buyers.
Brent crude has dropped 5 percent this week to just above $72 a barrel on concern about the spread of the delta variant of the coronavirus, particularly in Asia, but remains around 40 percent higher this year.
