Saudis likely to cut the price of crude oil as market grapples with glut

The February official selling price (OSP) for flagship Arab Light crude will likely fall 10c to 30c a barrel in US dollar prices to a premium of 30c to 50c to the average of Oman/Dubai quotes, six Asia-based refining sources said in a Reuters survey.

That would mark a third monthly decline, extending losses from a premium of 60c a barrel for January, the lowest in five years.

The February OSP for Arab Extra Light may decline by 10c to 20c, while that for Arab Medium and Arab Heavy may stay the same or dip by 10c, the survey showed.

In the spot market, cash Dubai’s premium to swaps rose last week, after having fallen since October amid abundant supplies. It has averaged 61c per barrel so far this month, down from 88c in November, and is half of October’s average.

The pressure came from output hikes from the Organisation of the Petroleum Exporting Countries and its partners, a group known as Opec+, as well as production growth in the US and other producers.

Oil from the Latin American producer accounted for about 1pc of global supply

Eight Opec+ members have paused oil output hikes for the first quarter of 2026 after releasing some 2.9 million barrels a day into the market since April 2025.

Global oil supply will exceed demand by 3.84 million barrels a day (bpd) in 2026, according to figures from the International Energy Agency’s latest monthly oil market report.

Meanwhile, the latest disruptions in Venezuelan oil exports have had a minor impact on the Middle East market.

Oil from the Latin American producer accounted for about 1pc of global supply, while the majority of its exports went to smaller-sized independent refiners in China.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about nine million bpd of crude bound for Asia.

State-oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.

Meanwhile, oil prices were little changed yesterday as investors took stock of dented hopes of a Russia-Ukraine peace deal and rising geopolitical tensions in the Middle East around Yemen.

US West Texas Intermediate crude gained 36c, or 0.6pc, to $58.44.

The Brent and WTI benchmarks settled more than 2pc higher in the previous session as Saudi Arabia launched airstrikes against Yemen and after Moscow accused Kyiv of targeting a Russian presidential residence, denting hopes of a peace deal.

Russia has said it will toughen its position in peace talks after accusing Kyiv of attacking the residence, an allegation that Kyiv dismissed as baseless and designed to undermine peace negotiations.

“I guess the market has now adapted again its expectation, not looking for any breakthrough for a peace agreement between Ukraine and Russia in the short term,” said UBS analyst Giovanni Staunovo.