Saudi Arabia lowers oil prices for Asian buyers

Saudi Arabia has reduced the official selling price of its crude oil to Asia for October deliveries, marking the second consecutive monthly cut. The premium for its flagship Arab Light crude was set at $2.20 per barrel above the Dubai/Oman benchmark, down by $1 from September levels.

The move exceeded market expectations, as most analysts had anticipated a smaller cut of between 40 and 70 cents, according to Reuters. Prices for other Saudi crude grades bound for Asia were also lowered by $0.90 to $1 per barrel.

Traders told Bloomberg the decision reflected softer demand outlooks in the region, particularly from China, even as global oil prices held steady at the start of the week.

China, the world’s largest crude importer, has sent mixed signals in 2023. After a weak start to the year, imports surged from March onwards, mainly for stockpiling rather than immediate consumption, analysts noted. At the same time, concerns are mounting about a nearing peak in China’s oil demand growth.

A recent forecast from a state-backed research institute suggested that China’s oil demand could peak by 2027, with only modest growth of 100,000 barrels per day expected this year. The report highlighted the impact of rising EV sales and LNG-powered trucks, estimating EVs alone could displace around 580,000 barrels per day of gasoline demand in 2023.

However, the latest industry data shows momentum in EV adoption is slowing. In August, sales of EVs and hybrids grew 7.5% year-on-year, down from a 12% increase in July, signaling a potential shift in demand dynamics ahead.