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Saudis Re-Unleash Oil Weapon, Slash Asia Prices By Most In 14 Years

"This is further evidence that they are hellbent on protecting their market share in China," warns one strategist as just when US talking-heads thought things were 'stabilizing' Saudi Aramco slashes its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks - the biggest discount in 14 years. As Bloomberg reports, the desert kingdom is continuing to fight for market share, and using the oil weapon by "trying to stay competitive in what is the biggest area of growth," as Middle Eastern producers are increasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia.

Biggest discouint to Asia since records began...

 

As Bloomberg reports,

Saudi Arabia, the world’s largest crude exporter, cut pricing for March oil sales to Asia, a sign that the desert kingdom is continuing to fight for market share.

 

State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks, the company said in an e-mailed statement Thursday. That’s the lowest in at least the 14 years since Bloomberg began gathering data.

 

“This is further evidence that they are hellbent on protecting their market share in China,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone Thursday. “They are trying to stay competitive in what is the biggest area of growth.”

 

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 U.S. in 2014, according to International Energy Agency data.

 

...

 

Saudi Aramco, as the producer is known, cut differentials on each of the four other grades it sells to Asia, its largest market, and raised them to the U.S., northwest Europe and the Mediterranean region, according to Thursday’s statement. 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.

 

“Asia is still the market that they want to keep, so they are pricing to keep the crude attractive,” Olivier Jakob, managing director of Zug, Switzerland-based researcher Petromatrix GmbH, said by phone Friday. Saudi Aramco increased pricing to the Mediterranean region where “demand has been good because refining margins are good,” he said.

 

...

 

“The U.S. used to be the market the Saudis were most concerned about preserving market share in, but that’s no longer the case,” O’Grady said. “China is where they see growth coming from in the decades ahead and the U.S. is also producing a greater share of the oil it needs.”

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