U.S. running out of places to store oil: Trader
Traders and refiners expect Saudi Aramco to cut pricing for its flagship crude to the lowest in at least two decades, escalating a price war with rival suppliers even as the coronavirus throttles global demand.
The world’s biggest oil exporter is expected to slash its official pricing for May sales of Arab Light crude to Asia by between $3.50 and $3.75 per barrel, according to the median estimates in a Bloomberg survey of eight traders and refiners.
Such a cut would make Arab Light its cheapest since at least 2000, when Bloomberg began compiling data. After Aramco slashed pricing for April sales, other producers made deep cuts of their own, locking horns in a struggle for market share. Saudi Arabia, Russia and others also plan to boost output, inflaming the price war even as the pandemic destroys demand.
Aramco officials plan to meet on Sunday to set pricing for May, according to people with knowledge of the matter.
The kingdom is flooding the market with deep-discount crude after OPEC’s alliance with partners such as Russia broke down earlier in March. Output cuts they had agreed to previously will expire at the end of this month, after which producers will be free to pump at will.
Saudi Arabia has pledged to supply a record 12.3 million barrels a day in April and is directing huge volumes of crude toward Egypt as part of preparations to flood Europe with its oil.
A decline in Saudi domestic demand, due to lockdowns to fight the coronavirus outbreak, will enable the country to export even more of the oil it produces starting in May, the energy ministry said.
The U.S. has tried to persuade Saudi Arabia to scale back its plan to flood the market in a bid to shield its own oil producers.