Saudi Arabia Lowered Its Official Prices To Asian Customers Tuesday, The First Price Cut In 7-Months

Gasoline futures are trading at their lowest levels of the year, while WTI and ULSD futures are touching fresh 5-month lows this morning as signs of building supply and slowing demand both seem to be hitting at the same time, while the charts are suggesting we’re on the verge of another technical sell-off if the buyers don’t step in soon. 

Saudi Arabia lowered its official prices to Asian customers Tuesday, the first price cut in 7- months, just in time for Vladimir Putin’s visit to the Kingdom, which could be a market wild card that could send prices higher if a new output cut agreement is reached, or plunging if the two disagree like we saw back in 2014 and 2020. Meanwhile the API report inventory builds across the board in the US last week, with gasoline stocks up 2.8 million barrels, while distillates grew by 890,000 barrels and crude oil built by 594,000. The build in crude oil is pretty small, but considering reports that US oil exports are at an all-time high, the fact inventories aren’t dropping is seen as a bearish figure, supported by softer time spreads moving further into contango this week. The EIA’s weekly report is due out at its normal time.

Adding to the downside pressure in refined products this week is word that Kuwait’s Al Zour refinery has not only recovered from several upsets in November, but has brought all units fully online for the first time and gradually approaching its capacity of 615mb/day. That facility will compete directly with both Chinese and US refineries for European buyers and is playing a big role in the relatively serene price action in futures this year, compared to when the world was scrambling to find replacements for Russian supplies 18-months ago.

Exxon and other producers pulled out of Venezuela 16-years ago after Hugo Chaves decided to nationalize the oil industry and impose a retroactive tax on the companies who were developing the country’s fields. Since then, Exxon’s focus on neighboring Guyana has led it to become one of the fastest growing producers in the world, only to see a new referendum from Venezuela put that production at risk.    

Click here to download a PDF of today's TACenergy Market Talk.