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Saudi Arabia’s senior oil officials appear sanguine, at least publicly, in the face of sliding global oil prices, which have sunk to a near two-year low. Nor do they seem worried by the surge in US shale oil production despite signs that a glut of light sweet crude oil is shifting market balances at a time of slowing demand in Asia.
While taking a long-term view of market fundamentals, which it considers robust, the kingdom is nonetheless taking immediate action to manage output. It has also adjusted its official selling prices in line with current market fundamentals. As the world’s swing oil producer, Saudi Arabia cut its production by 400,000 b/d in August, mainly due to weakening demand in Asia and a fall in exports to the US. It reduced sharply the price of oil sold into Asia, setting its October OSPs at their lowest in over three years, with the steepest cut reserved for its Arab Heavy grade, in an apparent bid to recapture market share lost to Angola and Oman in an increasingly competitive Asian market (see graph). The OPEC kingpin appears, at least for now, to have chosen to defend market share over price. It remains to be seen if its October export volumes rebound accordingly.
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