Insight - Crude oil price cut for Asia shows demand concerns

Marketing strategy: A file picture showing Saudi Aramco engineers at a natural gas plant in Saudi Arabia. It’s likely that the company wants to see China and other customers in Asia return to taking full-term volumes, and a lower OSP will help in that regard. —AP

SAUDI Arabia cut the price of crude oil for October delivery to its customers in Asia by more than the market expected, a sign that demand in the world’s top-importing region remains tepid.Saudi Aramco, the state-controlled oil giant, said in a statement on Sept 5 that the official selling price (OSP) for its benchmark Arab Light crude for delivery to Asia would be lowered by US$1.30 (RM5.39) a barrel to a premium of US$1.70 (RM7.05) a barrel over the average of Oman and Dubai crude prices.

This was a much deeper price cut than the market expected, with a Reuters survey of refiners in Asia prior to the announcement forecasting a reduction of just 20 US cents (83 sen) to 40 US cents (RM1.66) a barrel in the OSP for Arab Light.