Saudi Aramco is expected to reduce the price of its main oil crude to Asia for the first time since last June, as the influx of cheaper barrels from America and Europe leads to intensifying competition in the largest oil importing region in the world.

According to the average estimate in a Bloomberg survey of six refiners and trading companies, the state-owned Saudi company is expected to reduce the official selling price for Arab Light crude by about $1.05 per barrel for January contracts compared to the previous month. This would be the largest decline since February.

Physical oil markets in Asia declined over the past month, and the price of Brent crude, which is seen as a global standard, fell by about 15% compared to the high price it reached in late September, thus making it difficult for Saudi Arabia to maintain the current oil price levels.

On the other hand, supplies from the United States, Guyana and the North Sea increased, highlighting that the Kingdom's strategy of restricting production puts it at risk of losing part of its market share.

The price of oil is vulnerable to decline

Due to supply constraints from OPEC+ producers, purchasing oil from outside the Middle East now appears more attractive for Asian buyers in light of the rise in Dubai crude prices, which is a basic measure for pricing most Arabian Gulf crudes. Dubai and Brent crude oil are now close to the parity level, according to PVM Oil Associates data, which is an unusual situation, as Brent crude oil in general is often higher in price. The price of US West Texas Intermediate crude is currently about $5 per barrel less than its Middle Eastern counterpart (Brent).

Expectations in the poll varied from estimating declines of about 75 cents to $2 per barrel, and were mostly based on the assumption that Saudi Arabia would extend its unilateral production cuts of 1 million barrels per day into next year during the upcoming OPEC+ meeting on Thursday. Aramco usually publishes its official crude oil prices in the first five days of the month.