Saudi Arabia Poised to Cut January Crude Prices for Asia to Multi-Year Lows
Top oil exporter Saudi Arabia is expected to slash its official selling prices (OSP) for crude oil in January for Asian buyers to the lowest levels in at least four years, according to industry traders. The anticipated reductions follow a decline in Middle Eastern benchmark prices amid softening demand.
Arab Light OSP May Drop Significantly
Flagship grade Arab Light’s OSP could drop by 70 to 90 cents per barrel from December levels, according to a survey conducted by Reuters with six Asian refinery sources. If confirmed, this adjustment will bring the price to its lowest point since 2019.
The expected reduction is aligned with November’s market conditions, where the backwardation—prompt prices higher than future months—of Dubai crude narrowed by 86 cents, reflecting weaker market fundamentals.
Heavier Grades Could See Larger Reductions
Alongside Arab Light, cuts for heavier grades such as Arab Medium and Arab Heavy are anticipated to be even more pronounced. This reflects a significant drop in fuel oil margins and weak refining economics, particularly in China.
“Refiners are still grappling with poor refining margins, especially for heavy grades,” one respondent noted.
OPEC+ Meeting a Critical Factor
The upcoming OPEC+ meeting on December 5 may further influence Saudi Arabia’s pricing strategy. The oil-producing alliance is reportedly deliberating a delay in its planned January production hike. The outcome of these discussions could shape supply expectations and, in turn, Saudi Aramco’s final pricing decisions.
Saudi Arabia traditionally announces its crude OSPs around the fifth of each month. These benchmarks impact other major regional suppliers such as Iran, Kuwait, and Iraq, collectively affecting nearly 9 million barrels per day of crude exports to Asia.
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Expected Price Adjustments for January
Below are the projected OSP changes for Saudi crude grades (in $/bbl against the Oman/Dubai average):
| Grade | Dec OSP | Change Estimate | Jan OSP Projection |
|---|---|---|---|
| Arab Extra Light | +1.50 | -1.00 to -0.70 | +0.50 to +0.80 |
| Arab Light | +1.70 | -0.90 to -0.60 | +0.80 to +1.10 |
| Arab Medium | +0.95 | -1.00 to -0.65 | -0.05 to +0.30 |
| Arab Heavy | -0.20 | -1.10 to -0.65 | -1.30 to -0.85 |
Pricing Methodology
Saudi Aramco determines its OSPs based on customer feedback and market trends over the prior month, factoring in product yields and market dynamics. While company officials declined to comment on the upcoming price changes, analysts expect further clarity post-OPEC+ deliberations.
This anticipated move underscores the kingdom’s response to fluctuating market conditions, aiming to maintain competitiveness amid evolving regional and global dynamics.
