Saudi Arabia has slashed oil prices for October futures, which is a sign that the world’s largest exporter of black gold is preparing for another fluctuation in fuel demand amid new outbreaks of the Covid-19 coronavirus infection around the world. The kingdom’s state-owned oil producer Saudi Aramco has cut production of its key Arab Light for supply to Asia, its main market. It also lowered prices for US buyers of Saudi fuel, Bloomberg reports today, September 7.
Oil demand has plummeted this year after the Covid-19 pandemic forced national governments to impose restrictive measures and partially freeze their economies. Air transportation, one of the largest consumers of fuel, suffered the most. Saudi Arabia, Russia, and other producers under the OPEC + format agreed in April to cut production by almost 10 million barrels per day, which is about 10 percent of world supplies, in order to support prices, the American news agency reminds.
These cuts and a rebound in demand in China have since helped oil prices more than double. But since the beginning of this year, they still show a decline of 35 percent. Last Friday, September 4, Brent crude fell to $ 42.66 a barrel, the biggest weekly decline in nearly three months as new Covid-19 infections continued to rise in countries such as the US and India.
“Aramco recognizes the importance of China to the global oil market,” said Giovanni Staunovo, an analyst at UBS Group AG. “The cut (in oil prices) for October could help support stronger imports from China in the coming months.”
The Saudis have raised prices from June to August for Asia. However, demand from refineries has declined since that time. Asian refineries are operating with large reserves of fuel accumulated in the second quarter of the year when oil prices fell to historic lows.