State oil firm Saudi Aramco cut the official selling price (OSP) for its Arab Light crude to Northwest Europe, a region that buys only a small proportion of Saudi Arabia's crude, by $1.50 a barrel for February, putting it at a discount of US$4.65 a barrel to the Brent Weighted Average (BWAVE), the lowest since 2009.
However, Aramco also raised its February price for its Arab Light grade for customers for Asia - the largest of its major markets, accounting for more than half of its exported crude - by 60 cents a barrel versus January to a discount of $1.40 a barrel to the Oman/Dubai average.
The $2 discount to Asia in January was the largest in records going back more than a decade, but traders had been expecting Aramco to hike prices by at least 20 to 30 cents due to the narrowing spread in the Dubai market.
The Arab Light OSP to the United States, the fifth consecutive monthly cut, was set at a premium of 30 cents a barrel to the Argus Sour Crude Index (ASCI) for February, down 60 cents from the previous month.
The Kingdom's move to cut its OSPs has been perceived by many traders as a signal of its decision to abandon efforts to shore up falling crude oil prices and, instead, focus on maintaining its share of key markets.
“The moves are reinforcing that the Saudis just don’t intend to do anything to rebalance (price) levels," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.
Benchmark Brent oil prices held on to earlier deep losses following the publication of the Saudi OSPs on Monday, trading at around $53.50 a barrel, down $3 on the day.
Some analysts, however, have said they see the changes in monthly differentials as a simple reflection of deteriorating market conditions, not an indicator of policy.
One trader said that the cuts to Europe may be a result of trying to price out West African barrels from Europe.
West African crude oil exports to Asia are set to fall to around 1.69 million barrels per day (bpd) in January from 1.93 million bpd planned for December, a Reuters survey showed on Monday.
The level of West African exports to Asia for January is set to be the lowest since August and compares with a level of 1.86 million for the same month last year.
Saudi Arabia shipped 54 percent of its crude oil exports to Asia in 2013, with another 17 percent to the United States, according to Saudi Aramco's annual report. It shipped just 5.4 percent to Europe and 6.7 percent to the Mediterranean. In total, crude exports ran at 6.8 million bpd.- Reuters