HomeMediaLatest NewsThe oil market is storming - is there a price war ahead?

The oil market is storming - is there a price war ahead?

09 January 2024

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to Finam.ru about the current situation on the global oil market and the meaning of the increase in Saudi Aramco's February selling prices.

At the beginning of the week, oil prices fell sharply after Saudi Arabia's decision to lower prices for "black gold".

"The concerns are still the same as in December: potentially weak demand in the first half of 2024, especially in Asia, outstripping production growth in the United States, doubts about the sustainability of cuts within OPEC+, the preservation of the general, albeit unstable, trend towards the growth of commercial reserves," Alexey Belogoryev said.

He recalled that Saudi Aramco monthly adjusts the official sales prices (OSP) of its oil grades for the next calendar month for different regions, this is a common practice for the company.

"In the second half of 2023, up to November, these prices were growing briskly. The February price for Asian countries has been set at the lowest level in the last 27 months (since November 2021), but this only means that the Saudis raised prices too high in 2023 and their oil became less competitive because of this. It is worth explaining that the OSP price is not fixed, but floating to the average of two reference quotes - Oman and Dubai (Platts Dubai/DME Oman), and is traditionally traded at a premium to them. In November-December 2023, the premium for the key Arab Light grade was $ 4 per barrel, in January it was reduced to $ 3.5, for February deliveries it was reduced to $ 1.5. But it's still a premium, not a discount. And its change is not directly related to the dynamics of prices for reference varieties. In fact, Saudi Aramco, almost a whole quarter late, brought its marketing policy in line with the policy of its main competitors," the expert explained.

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