Due to mounting pressure from Iraqi, Russian and Iranian oil exports, Saudi Arabia recently discounted its crude oil so that it could maintain its share of major Asian oil markets.
The price cut, which will also benefit people purchasing from Saudi in September, follows two years of high-volume oil pumping by the kingdom, which is currently the biggest producer of oil in the world, and which had previously made the decision to fuel an oil glut and let prices drop rather than give away sales to its global rivals.
However, in Asia, which has been the main source of growth in oil demand in recent times, Saudi Arabia has struggled to maintain its ground.
On Sunday, July 31, the kingdom lowered its prices for Asian customers to $40.70 per barrel (depending on the oil’s grade), contributing to a global crude price drop to levels lower than $42 per barrel – the biggest price cut seen since October 2015.
An individual familiar with the Saudi Arabia price cut discussions told The Wall Street Journal that this was so that the country could remain competitive with other Middle Eastern and European nations.
In the second quarter of this year, Iraq outsold Saudi Arabia by a million in India, which illustrated the shift in oil sales away from the country. Just last year, Saudi sold around 900,000 tons more than Iraq in India. Russia and Iran have similarly been successful in taking business away from the kingdom, prompting these latest price cuts, which may yet affect products like Mobil 1 Racing 4T in the future.