EU wants to 'save' nuclear deal, Saudi Arabia slashes oil prices

May 10, 2022

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On May 8, 2022, Saudi Arabia announced the official crude oil price. The benchmark oil sold to Asian customers, Arabian Light crude oil (known as Saudi light crude oil in the industry), the official price for delivery in June was set at a premium of 4.4 US dollars per barrel to the average price in Dubai and Oman. , a month-on-month decrease of $4.95 barrels. Analysts were shocked, and the slashing of official prices appeared to be at odds with the Saudi energy minister's recent approach to the market.

At the same time, Saudi Aramco also cut prices for sales to Northwest Europe and the Mediterranean region. It should be mentioned that Saudi Aramco did not allow the United States to enjoy preferential prices, and there was no change in oil prices sold to the United States in June.

At the meeting just concluded last week, Saudi Arabia and OPEC+ believed that the current market supply and demand are in balance, and the supply cut to Russia should not be made up by OPEC. But recalling that in early March 2020, Saudi Arabia was dissatisfied with Russia’s unsupported production reduction plan. In the absence of an agreement by OPEC+, Saudi Arabia announced a limit increase in production and significantly lowered the official crude oil price, starting a price war, April 20, 2020 , we have witnessed the historical moment of negative oil prices.

Therefore, this round of substantial reduction in official prices cannot be ruled out that Saudi Arabia is wary of the recent sharp drop in Russian spot crude oil prices. After all, the region that can accept and urgently need low-priced crude oil is Asia, especially developing economies such as India and Southeast Asia. They are suffering from inflation exported by the United States. Analysts pointed out that under the impact of Russian crude oil, oil-producing countries in the Middle East will be forced to sharply cut official prices one after another to stabilize customer demand.

In addition to the influence of Russia, the advance of the Iran nuclear deal and the expected impact of Iranian oil's return to the market on oil prices also forced Saudi Arabia to temporarily reduce oil prices.

It is reported that on May 10, the EU Coordinator and Deputy Secretary-General of the EU External Action Agency Mora will visit Iran. Foreign media reported that Mora's visit was aimed at "saving" the Iran nuclear deal and promoting the negotiation process, while the EU hopes to break the current deadlock in the negotiations.

Reuters quoted Iran's Guangming News Agency as saying that Mora's visit could be seen as a new step in constructive consultations on the few but important issues remaining in the negotiations on the Iran nuclear deal.

Global oil prices have soared since the escalation of the Russia-Ukraine conflict, Reuters said, as major oil producer Iran is in no hurry to reach a nuclear deal. In March of this year, CNN quoted analysts as saying, "The conflict between Russia and Ukraine has brought a lot of pressure to Western governments. If all parties to the Iranian nuclear negotiation can reach an agreement as soon as possible, it will ease the current energy market. Extremely volatile situation. If Iranian oil returns to the market, oil prices could fall by at least 10%.”

Although the European Union imposed sanctions on Russian oil, which may lead to tighter supply, international crude oil futures closed sharply lower on Monday due to Saudi Arabia's cut in oil prices and the advancement of the Iran nuclear deal. As of the close of early morning today, WTI June crude oil futures closed down 6.3% at $103.09 per barrel; Brent July crude futures closed down 5.7% at $105.94 per barrel.

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