Saudi Arabia Considers Price Cuts for Asia
Saudi Arabia, the world’s top oil exporter, is expected to lower its crude oil prices for Asia in October. Market sources anticipate a reduction of 50 to 70 cents per barrel for its flagship Arab Light crude, driven by a recent slump in the Middle East benchmark Dubai prices. This move reflects weakening refining margins, particularly in China, where economic struggles in the manufacturing and property sectors are dampening fuel demand. Analysts are cautious about the market’s performance in September, typically a strong month for oil demand, suggesting that it may fall short of expectations this year.
While some expect significant price cuts, others believe the October Official Selling Price (OSP) for Arab Light may remain stable, citing a slight recovery in Dubai prices towards the end of last month. For heavier Saudi grades like Arab Medium and Arab Heavy, a more modest price reduction is anticipated, supported by ongoing demand for fuel oil.
OPEC+ Supply Increases Set for October
OPEC+ is scheduled to increase oil production in October as part of a gradual easing of previous output cuts. Eight members of the group are set to boost production by 180,000 barrels per day, as they begin to unwind the 2.2 million barrels per day cuts introduced earlier. This increase raises concerns that higher output could exert additional pressure on prices, especially if WTI crude remains closer to $70 per barrel rather than $80. Market analysts suggest that the actual impact on prices will depend on how well these production increases match the prevailing market demand.
Libya Resumes Domestic Oil Production
In Libya, the Arabian Gulf Oil Company has resumed production at a rate of up to 120,000 barrels per day, primarily for domestic needs. However, exports remain halted due to a standoff between rival factions that previously shut down most of the country’s oilfields. Despite this resumption, the overall market sentiment remains bearish, with both Brent and WTI crude experiencing consecutive monthly losses.
Market Outlook: Bearish Sentiment Prevails
The outlook for crude oil prices remains bearish in the short term. China’s manufacturing activity dropped to a six-month low in August, heightening concerns about the country’s economic growth and its impact on global oil demand. Meanwhile, in the U.S., oil consumption has slowed to its lowest seasonal levels since the pandemic, further weighing on prices. Analysts from ANZ warn that economic pressures in both China and the U.S. may compel OPEC to reconsider its planned production increases, potentially delaying the phase-out of voluntary cuts to stabilize prices.
Given these factors, traders should prepare for continued volatility, with the potential for further price declines if demand does not improve or if OPEC+ proceeds with its output hikes.
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Publish date : 2024-09-01 23:38:00
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