As COVID-19 continues to shrink energy demand, Saudi Arabia lowers oil prices

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In October, Saudi Arabia reduced oil sales prices, a sign that saw fuel demand grow amid more corona virus spreads worldwide for larger exporters worldwide.

Saudi Aramco, the state-run producer of the Kingdom, reduced its main crude grade Arab Light by more than anticipated shipments for its main Asian market. Prices for U.S. consumers have also decreased.

Aramco has lowered Arab Light to Asia for the first time since June, to discount the price of benchmark oil used by Saudis. The U.S. refineries are to see a fall in this second consecutive month of barrel reductions in this field and the first in six months. In northwestern Europe and the Mediterranean region, Aramco will also reduce pricing for lighter barrels.

After a pandemic that forced governments to lock up markets, airlines to end fights, and staff to stay at home, oil demand collapsed this year. In April, Saudi Arabia, Russia, and other producers from OPEC agreed to slow production by nearly 10 million barrels a day to lift prices around 10 percent world supply.

Giovanni Staunovo, a commodities analyst with UBS Group AG said”The decrease for October will help support stronger imports from China in the coming months. Aramco recognizes the role of China in the global oil market.”

In October, the company will lower the Light Export price to Asia by USD 1.40 per barrel to 50 cents below the regional reference amount. According to a Bloomberg report, a price of 1 dollar per barrel was forecast to pay for a 10 cent discount.

From June to August the Saudis increased Asian prices. However, because of the slow benefit from turning crude petrol and other fuels, refinery demand has eased. Asian refiners also use large stocks produced earlier in the year when crude prices dropped.

Since that time, these cuts and the revival of demand in China have helped to double oil prices. But about 35 percent of them are already down this year. Brent crude plunged to USD 42.66 with its biggest weekly loss of about three months, with infection rates in nations like the U.S. and India continuing to rise.

After Saudi oil exports to the country have decreased in August to the lowest in decades, Aramco’s prices for American buyers first decreased in April.

In other petrostates Mid-Eastern Nations, such as Iraq and the United Arab Emirates, which are the second and third largest producers in the Oil Exporting Countries Organization, Saudi Arabia typically sets the stage for price decisions.

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