Page 10 - DMEA Week 20 2022

DMEA POLICY & SECURITY DMEA

Saudi Arabia cuts crude

OSPs, Kuwait follows suit

MIDDLE EAST WHEN Saudi Aramco cut its export prices on being paid to events in Ukraine, with domestic
crude shipments to Asian nations last week, energy security seen as more pressing as the
analysts wasted no time in attributing the first warmer summer months approach.
reduction in prices in four months to ongoing In Taiwan, where power cuts are becom-
COVID lockdowns across China. ing increasingly common, the relatively minor
Kuwaiti exporters took similar action, in the export market for Middle Eastern crude has seen
process becoming the second largest OPEC+ price cuts half a world away passed on to the gen-
member to slash prices on crude destined for eral populace. Like elsewhere, this has primarily
Asian markets in June, and possibly beyond. been realised in the form of a decrease in prices
Prices of Kuwaiti oil exports had hit record at the pump.
high levels earlier this month. Overall, shipments from Saudi Arabia remain
Exporters in both nations have recently high though. Shipment averages in March have
appeared worried at lack of demand in China now been released, coming in at just over 7.2
through much of the second quarter. At pres- million barrels per day (bpd).
ent tens of millions of Chinese are being locked A month earlier the bpd rate passed the 7
into apartment buildings and images of deserted million mark for the first time since early 2020; a
city streets in major cities, Shanghai and Beijing time COVID-19 was just starting to affect global
included, are now commonplace. economies.
As a result, several sources currently have As such, with much of Europe and the US
Saudi Aramco pushing prices down by over now moving past the pandemic, the full effects
US$5 per barrel for its Super Light heading to of China’s lockdown on Middle Eastern exports
Asia next month. Extra Light prices were also will only be revealed in the coming months.
reduced by $4.95 according to the same sources. Saudi Arabia at least has moved to increase
The same cuts were not applied elsewhere. its crude bpd rate by over 100,000 each month
Prices on upcoming shipments to the US under an OPEC+ deal to guarantee global
remain unchanged at US$5.65 above the Argus supply.
Sour Crude Index (ASCI). Europe, however, did Whether or not Chinese demand will
see prices go down by US$2 - $3 per barrel. increase any time soon is part of a “complicated
While the cuts demonstrate the importance and grave” situation according to Premier Li
of the Asian markets to Middle Eastern export- Keqiang.
ers, there is now speculation in the East that 60% of all Saudi Arabian oil exported is sent
leveraging the possibility of future imports of to Asia. Much goes to China, but Japan, South
Russian crude may help push Middle Eastern Korea and India are also large-scale importers.
prices down even further. Factories are closed and supply chains have
For many smaller consumers of Saudi and ground to a halt across the nation of 1.4 billion.
other Middle Eastern nations’ crude, this “It’s obviously a terrible situation for citizens
remains a sensitive political ploy if realised. of Shanghai, and entire parts of Beijing have
Japan is a stand-out in much of East Asia in been told to work from home” one analyst said
this regard, having publicly agreed to refrain on a Gulf Intelligence podcast this month, add-
from importing Russian oil. This stance was ing “But it hasn’t spiraled or snowballed into
heavily publicized a week ago as Tokyo looks to something really, really dramatic. Therefore
abide by international sanctions. people have not worsened their demand-loss
Elsewhere in the region, there is less attention projections from China.”™

P10 www. NEWSBASE .com Week 20 19•May•2022