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The price of crude oil plummeted Monday morning due to the news that the state-owned company Saudi Aramco plans to lower prices for all major grades of black gold for customers from Asia and the US. The proposed discount will take effect from October this year.
Saudi Aramco plans a rollback in the price of Arab Light for the second month in a row. Arab Light is supplied primarily to the Asian region, which is the largest consumer of this raw material, as well as the largest market for the Saudi corporation itself. A price cut of $1.4 per barrel is expected. For Asia, it will be $ 0.8 lower than for Oman and Dubai. The Arab Super Light and Arab Extra Light varieties will fall even more for consumers from Asia: on average, the reduction will be $ 1.5 per barrel. And Arab Heavy will drop in price by $ 0.9 per barrel.
For its American customers, Saudi Aramco is also preparing a discount in October, which will range from $ 0.5 to $ 0.7 per barrel.
Of course, unexpected sales from Saudi Arabia could not but cause a negative reaction from market participants, who are already frightened by the rather precarious situation in the raw materials market that has developed in recent weeks. Saudi cuts hint that global oil demand, as experts have previously warned, is becoming even more volatile. Thus, the gap between supply and demand is rapidly increasing. This is the reason why countries cut oil prices in order to receive at least some dividends.
Considering that Saudi Arabia has always been the legislator of all initiatives in the raw materials market in the Middle East, it is worth expecting that other countries, including Iraq and the UAE, will also follow its example and the system of discounts will become widespread.
Meanwhile, market participants believe that the current oil price in the Saudi Aramco corporation is the fairest and in the interests of both sellers and buyers. However, there are also those who speak of the need for even greater reduction. Presently, this price situation is putting serious pressure on the market.
The price of futures contracts for Brent crude oil for November delivery on the trading floor in London dropped 1.08% or $ 0.46 on Monday morning, which moved it to $ 42.2 per barrel. Friday's trades also closed in the negative zone with a reduction of 3.2% or $ 1.41.
The price of futures contracts for WTI light crude oil on the electronic trading floor in New York also went down by 1.28% or $ 0.51, which lowered the price below the strategic mark of $ 40 per barrel. Its current level is around $ 39.26 per barrel. Friday's trading session also brought a huge loss of 3.9% or $ 1.6.
As a result, there was a global decline in the prices of both brands of crude oil last week. Brent began to cost less by 6.9%, which is the maximum decline in the last three months. WTI fell 7.5%, which was due to several factors. First, the extremely volatile demand for raw materials, which causes the greatest fears of market participants. Secondly, the continued growth of coronavirus infection in the world. New outbreaks of the disease were particularly noted in the United States and India. All this led to the fact that last Friday trading on the raw materials market ended at the lowest level for the last two months.
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