- A new wave of COVID quarantine in China raises concerns about the stability of oil demand.
- In response to growing fears of falling demand in China, Saudi Aramco is lowering its oil export prices for the first time in four months.
Saudi Aramco has lowered its oil export prices for the first time in four months amid quarantine in China over the Covid pandemic, which raises concerns about demand stability.
According to Bloomberg reportAramco lowered the price for its Super Light for Asia by more than $ 5 per barrel and the price for its Extra Light by $ 4.95 per barrel for deliveries in June.
Crude oil prices for Europe have been more moderately lowered by the Saudi state giant, between $ 2 and $ 3 a barrel, Bloomberg also reported. Export prices to the United States have remained unchanged since May.
The price cuts came after several price hikes that brought Saudi crude prices to record levels earlier this year amid a jump in international prices caused by insufficient supplies and the war in Ukraine.
The latest Chinese series of closures has worried the entire business world about the future. In Europe, nearly 60 percent of companies with a presence in China have cut their growth projections for 2022, with more than half of the cuts between 6 and 15 percent, CNBC reported last week.
Business sentiment among Chinese companies has also suffered a blockade, local polls show.
Currently, the effect of quarantine on China’s oil demand is largely the only bearish factor for oil. Scarce global supply, the war in Ukraine, and OPEC’s unwillingness – and inability – to significantly increase production have joined forces to sustain scales well above $ 100 per barrel.
Saudi Arabia plays a vital role in maintaining high prices because, along with the UAE, it is the only OPEC member that has real capacity to increase production. However, he signaled that he has no intention of increasing production beyond what has already been agreed, even as the global situation with oil supplies deteriorates due to Western sanctions on Russia.
Charles Kennedy for Oilprice.com
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