Saudi’s cut Asia oil pricing to a record low

Saudi Arabia, the world’s largest crude exporter, cut pricing for March oil sales to Asia, signaling that they are continuing to fight for market share. State-owned Saudi Arabian Oil Co. (Saudi Aramco) lowered its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks.

Middle Eastern producers are increasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia. China was the world’s second-biggest crude consumer after the US in 2014, according to International Energy Agency data.

Oil prices have collapsed since the Organization of Petroleum Exporting Countries decided to maintain its output target on November 27, fanning speculation that Saudi Arabia and other members were determined to let North American shale drillers and other producers share the burden of reducing an oversupply.

Saudi Aramco cut differentials on each of the four other grades it sells to Asia, its largest market, and raised them to the US, northwest Europe and the Mediterranean region. The discount on Extra Light crude to Asia also dropped to a low of at least 14 years and Arab Medium was cut to within 10 cents of its record discount for buyers in Asia.

Persian Gulf oil producers sell most of their crude under long-term contracts to refiners. Most of the region’s state oil companies price their oil at a premium or discount, also known as the differential, to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

Saudi Arabia’s share among the top three suppliers to China fell to 37 percent in December, from 44 percent in October, as the country lost ground to Angola and Russia. Saudi Aramco is in contention with Mexico to be the second-largest supplier behind Canada.

The kingdom’s state oil producer raised the differentials on all crude it will ship to the US next month by 15 cents a barrel, pushing the premium for Arab Light to 45 cents more than the US Gulf Coast benchmark.

Saudi Aramco took the oil market by surprise when it trimmed its November crude pricing to five-year lows for Asia, signaling the biggest producer in OPEC would defend its market share rather than seek to prop up prices.