Saudi Arabia sells most of its oil to Asia, which China, Japan, South Korea and India being the biggest buyers. Image Credit: Reuters

Saudi Arabia cut oil prices for customers in Asia and Europe as coronavirus lockdowns and sagging economies cool energy demand in the two regions.

State-controlled Saudi Aramco lowered its key Arab Light grade for next month’s shipments to Asian refineries from a record to $5.85 a barrel above the Middle Eastern benchmark. That’s a decrease of almost $4 from September.

The move was largely in line with traders’ expectations and follows a 25 per cent drop in Brent crude futures in the past three months to below $95 a barrel.

It also came a day after OPEC+, the producers group that Riyadh leads along with Russia, agreed to a surprise, albeit token, production cut for October. The 23-nation alliance is seeking to stabilise oil markets amid faltering economies and rising inflation. In China, the world’s biggest crude importer, the spread of virus lockdowns is hurting manufacturers and retailers.

Aramco lowered all grades to Northwest Europe and the Mediterranean, most of them by $2 a barrel. The company raised pricing for US buyers by 50 cents, except for Arab Light, which was kept unchanged.

Saudi Arabia sells most of its oil to Asia. China, Japan, South Korea and India are the biggest buyers.

Despite signals of slowing consumption in many major economies, the global market remains tight. Many analysts forecast that demand will outstrip supply in the final quarter of this year, especially if Russia reacts to a G7-proposed cap on its oil prices by limiting exports.

Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview late last month that futures markets were “in a state of schizophrenia” following Russia’s attack on Ukraine. They are giving “a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high”, he said.