Saudi Aramco trims oil prices to Europe and US as it tries to regain market share

State producer Saudi Aramco has increased the official selling price of its main Arab Light crude grade for buyers in Asia, and cut the rates for Europe and the US. 

The divergent price views for different regions indicate local imbalances in the oil market. 

According to a report by Bloomberg, Saudi Arabia’s state-owned Saudi Aramco has raised the official price of crude oil by $0.90 per barrel for buyers in Asia for November.

However, the Kingdom has cut prices by $0.90 per barrel  for all grades of oil to Europe and the US for November landings.

ING Group in a report said the prices have been cut to regain market share in these two regions. 

High prices for Asia hint at higher demand

As Saudi Arabia has raised prices for its oil exports to Asia, the Kingdom hopes that demand in the region may increase in the coming month. 

The world has been concerned about growth in oil demand from China for the last few months.

The Asian giant remains the largest importer of oil. 

According to the Organization of the Petroleum Exporting Countries’ World Oil Outlook 2024, India, China and other countries in Asia are expected to be major drivers of crude oil between 2023 and 2050. 

The report claims that India’s oil demand is likely to grow by 8 million barrels per day during 2023-2050. China’s growth will be 2.5 million barrels per day. 

Both India and China will account for nearly half of the growth in oil demand from Asia, Africa and the Middle East during the next 27 years. 

Demand from OECD countries to decline

Saudi Arabia’s decision to trim crude export prices to Europe and the US stems from two primary reasons - lower demand and regaining market share. 

The Kingdom has been adhering to hefty production cuts as part of its deal with OPEC+. On top of that, the country has also been cutting oil output voluntarily by an additional 1 million barrels a day since late last year. 

This has dented the Middle Eastern country’s market share overall, particularly to the western world. 

ING Group said in a report:

Additionally, OPEC forecasts oil demand growth in countries within the Organization for Economic Cooperation and Development (OECD) will decline over the next couple of decades. 

According to OPEC’s data, oil demand in OECD countries will be 35.6 million barrels per day by 2050, which is significantly lower than 45.7 million barrels a day, projected in 2023. 

Brent crude nears $80 per barrel

Oil prices continued their merry run from last week as concerns over a wilder Middle East conflict increased. 

Rockets fired by Iran-backed Hezbollah militant outfit hit Israel’s Haifa on Monday, according to media reports. 

Traders believe that Israel is likely to carry out an attack on Iran’s oil facilities, which may wipe out about 4% of the world's oil supply. 

At the time of writing, Brent crude oil was 2% higher at $79.60 per barrel.

Prices look set to breach the $80 per barrel for the first time since August 30 as tensions continue to escalate in the Middle East.