Brent is down by nearly $1/bbl this morning as Saudi Arabia cut the official selling price (OSP) to Asia by $2/bbl for February shipments, with the $1.50 premium to Oman / Dubai sinking to its lowest since July 2021. The price cut falls broadly within market expectations, as Saudi Arabia was widely expected to slash prices for the key Arab Light grade as demand for barrels weakened last month; crude oil departures to Northeast Asia fell by 8% m/m in December amid an uncertain early 2024 outlook. Despite the largest price cut in over a year, Arab Light remains expensive compared to other Middle Eastern grades, but should increase its competitiveness in East Asia, which accounts for over 80% of its export market.
January is typically a soft demand month (reference to 2023 should be treated with caution due to strong North American demand after storm-disrupted December 2022 demand), and the week ahead could be a choppy one as the market begins to see this year’s first critical S/D datapoints, with this week set to be the first week of normality in Europe and North America following the disruptive Christmas season. Furthermore, this week we are expecting preliminary estimates for OPEC+ production in December; a close eye will be paid to quota compliance amid a currently expected 1.3M bbd additional cut to supply for January.
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