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Saudi Arabia’s Oil Pricing Strategy Faces Criticism.

Saudi Arabia’s Oil Pricing may have been set too high, potentially leading to a decrease in term supplies to Asian buyers in January. Traders and refiners informed Bloomberg on Wednesday that the world’s leading crude exporter had implemented a smaller-than-expected reduction in the price of its oil to Asia.

On Tuesday, Saudi Arabia lowered the price of its primary crude, Arab Light, scheduled for loading in January for Asia, by $0.50 per barrel compared to the Oman/Dubai average – the benchmark for pricing Middle Eastern crude exports to Asia. While the market had anticipated a reduction, this marked the first official selling price (OSP) decrease for Arab Light in Asia in seven months. However, the reduction was only half of what market participants had predicted.

According to a Bloomberg survey of analysts, it was expected that Saudi Arabia would decrease the official selling price for Arab Light crude for Asian buyers by approximately $1 per barrel, placing it at around $3 per barrel over the Oman/Dubai average. Contrary to expectations, the actual price reduction set the Arab Light price for January loadings to Asia at $3.50 per barrel over the Oman/Dubai quotes.

Despite the price cut, traders and buyers at Asian refineries perceive the Saudi price as being too high. A purchase manager at an Asian refinery stated, “Saudi set the price too high. That could prompt some buyers to nominate fewer cargoes and turn to purchasing cheaper crude from other suppliers in the spot market,” as reported by Reuters.

Nominations are expected on Wednesday, with at least two buyers in Asia contemplating nominating lower contractual supply from Saudi Arabia for January loadings, according to information from traders and refiners shared with Bloomberg.

While Saudi Arabia reduced its OSPs across the board on Tuesday, lowering Arab Light prices for both Europe and the U.S., Asian buyers had anticipated more substantial price reductions. Consequently, they are likely to shift towards procuring more spot supply from the Gulf due to falling prices indicating weaker demand. This information was reported by John Hendrick for Heatingoilnews.com.

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