This weekend's 11th hour decision to cut OPEC oil output by 23% was
supposed to end the oil price war between Saudi Arabia and the rest of
OPEC+, but it appears Saudi Arabia did not get the memo.
While oil
production may (or may not) be cut by 9.7mmb/d on May 1, Riyadh
remembered that to capture market share one can manipulate volumes,
which are now set as per this weekend's OPEC+ agreement or one can
adjust price discounts, which are not. And as the kingdom faces stiff
competition from rival suppliers for market share in the prized Asian
market (or at least what's left of it after India cut demand by 70%),
the OPEC leader slashed its official selling prices to Asian customers for May by larger-than-expected margins this week, while keeping prices flat for Europe and raising them for the United States.
On Monday, Saudi Arabia’s oil giant Aramco set the May price for its Arab light crude oil to Asia at a discount of $7.3 to the Oman/Dubai average, down $4.2 a barrel from April, according
to a document seen by Reuters. Asian refiners had called on Saudi
Arabia to slash its crude OSPs for a third straight month in May after
Middle East benchmarks and refining margins dropped amid ample supplies
and lower demand due to the coronavirus. Overnight, China’s customs
bureau reported that overseas energy purchases weakened in March as
demand from the top importer took a hit from the coronavirus pandemic.
Crude oil imports fell to the equivalent of about 9.72 million barrels a
day, the least since July.
While Aramco cut Asian prices in hopes
of beating Russia, Iran and other producers to the punch, it raised the
May OSP of its Arab light crude oil to the United States to a discount
of $0.75 per barrel versus the Argus Sour Crude Index (ASCI), up $3 a
barrel from April, according to the document.
Aramco left its OSP for
Arab light crude oil to Northwestern Europe unchanged from April at a
discount of $10.25 per barrel to ICE Brent.
The
cut in prices to Asia reflect weak demand, while OSPs to Europe and the
United States reflect oil market fundamentals and the global supply cut
pact, an industry source familiar with the pricing process told
Reuters.
Then on Tuesday morning, Saudi Aramco again cut official
selling prices of all four grades to new record lows from Egyptian port
of Sidi Kerir for May, in line with big cuts in prices for other
customer regions, with some grades sold at a discount of as much as
$10.95/bbl:
- Arab Light OSP set at $9.85 discount to ICE Brent, vs -$8.40 for April
- Arab Extra Light also at -$9.85/bbl vs -$5.60/bbl
- Arab Medium -$10.95/bbl vs -$10.20/bbl
- Arab Heavy -$10.95/bbl vs - $10.50/bbl
Prices
of all four crude grades from Sidi Kerir are 45c higher than those
shipped from Ras Tanura in Persian Gulf for customers in Mediterranean,
compared with 20c higher in April’s price list.
And
so, between the IMF's warning earlier today, and Saudi Arabia's quiet
restart of the oil price war, Brent tumbled by over 5.5% this morning,
sliding below $30, after hitting a high over $36 just two trading days
ago as the unprecedented chaos in the energy market continues.
By Zerohedge.com
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