Saudis cut oil prices after OPEC+ restraint fuels rally

Saudi Arabia reduced oil prices for its main buyers, a day after OPEC+ sent crude futures surging by sticking to a plan for slow and steady supply increases.

State firm Saudi Aramco’s cuts for customers in Asia, Europe and the U.S. may take some of the sting out of that jump for refiners at a time when a global gas shortage is pushing up demand for crude among power producers.

The OPEC+ cartel, led by the Saudis and Russia, on Monday opted to raise daily output in November by 400,000 barrels, less than some traders and analysts had anticipated. The main U.S. benchmark, Wests Texas Intermediate, jumped to a seven-year high of almost $80 a barrel.

Aramco lowered its key Arab Light grade for Asian customers in November by 40 cents to $1.30 a barrel above the benchmark. The world’s largest oil company also cut prices for all other grades headed for Asia, as well as the Mediterranean and Northwest Europe regions. Prices for most U.S.-bound shipments were reduced.

Rising oil prices can crimp margins for refiners still suffering from last year’s decline in fuel demand as the coronavirus pandemic ravaged economies.

The cut in the official selling price for Arab Light to the smallest premium since March was in line with market expectations. Saudi Arabia sends more than 60% of its crude exports to Asia, with China, South Korea, Japan and India the biggest buyers.

Since the start of this year, Brent crude has jumped 60% as major economies recover and as the Organization of Petroleum Exporting Countries and its partners maintain supply restrictions. The 23-nation grouping, known as OPEC+, cut output by around 10 million barrels a day at the start of the pandemic and is still withholding roughly half that amount from global markets.

Aramco’s chief executive officer, Amin Nasser, said on Monday that demand for crude had climbed by 500,000 barrels a day as some businesses and power producers are forced to switch from gas to oil.

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