Saudi Arabia’s decision to cut March oil prices for Asian customers by more than expected appears to be a three-pronged move to maintain market share, boost refining margins and stave off demand destruction.
Saudi Aramco, the world’s biggest oil exporter, cut the official selling price (OSP) for its benchmark Arab Light grade to a premium of
Market expectations had centred on a cut of around
The real risk is that demand in
But this is still higher than the
REGULATION OF COSTS
India’s gasoline prices have risen 7.6 per cent in the past year and by 24 per cent in the past three. The rising retail fuel prices and slower economic growth may curb India’s growth in oil imports, which rose 7.8 per cent to 3.86 million barrels per day in 2013.
Cutting OSPs may allow refiners to boost margins and lower fuel costs and thus mitigate the possibility of demand destruction in economies like
While this is still far from a certainty, any further easing of sanctions against Tehranwill encourage
The possibility of increased Iranian shipments and more cargoes from neighbouring
CHOICE OF SUPPLIERS
Throw into the equation more Russian oil through the ESPO pipeline and it becomes apparent that Asian refiners, while not awash in a glut of oil, certainly have more choice of suppliers currently than they have had in recent months. This will be more the case in the next few months as many refiners across
Refining margins are slowly recovering as well, with the profit from processing a barrel of
While not sufficiently strong to cause refiners to whoop for joy, margins are enough to ensure that runs won’t be cut because of low profitability.
But with the outlook for demand growth in
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