SINGAPORE: The Middle East crude market came under further pressure on Thursday after two more Gulf producers cut their monthly prices sharply to match those from Saudi Arabia.
The price cuts are likely to encourage Asian refiners to lift more supply under term agreements rather than purchase in the spot market.
Kuwait has cut the official selling price (OSP) of its crude sold to Asian buyers for October to $2.35 a barrel below the average of Oman/Dubai quotes, down $1.55 from the previous month, and slightly more than the $1.50 a barrel cut for comparative grade Saudi Arab Medium.
Iran has set the OSP of its Light crude oil loading in October to Asian buyers at 18 cents a barrel above the average of Oman/Dubai quotes, traders said on Thursday, down $1.72 from the month before.
The deep price cuts reflect weak demand for physical crude as refiners struggled with narrowing margins amid excess refining capacity and slower global demand growth.
Global oil demand growth is softening at a remarkable pace due to weaker European and Chinese economies, the International Energy Agency said in its monthly report released on Thursday.
For the whole of 2014, the IEA reduced demand growth projections by 150,000 barrels per day to 900,000 bpd while for 2015 it cut estimates by 100,000 bpd to 1.2 million bpd.
Top oil exporter Saudi Arabia told OPEC it reduced its oil output in August by 400,000 barrels per day (bpd), a cutback coinciding with a drop in oil prices towards the kingdom's preferred level of $100 a barrel.
JBC Energy analysts said the supply cut was likely in response to lower demand rather than an attempt by Saudi Arabia to support prices.
"Given that these barrels will reach markets at a time of refinery maintenance, these cuts appear not necessarily a sign of Saudi Arabia willingly cutting production to support the market, but rather a normal (only perhaps more abrupt than usual) reduction in production from a level, 10 million bpd, that we anyway think Saudi Arabia is not willing to sustain for a long period of time," JBC analysts said in a note.
DME OMAN
DME Oman for November settled at $96.17, down $1.30, at 0830 GMT. This puts DME Oman at 78 cents a barrel below Dubai swaps against an 85-cent discount in the previous session.
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