Abu Dhabi Cuts Crude Prices in Saudis’ Wake as Oil War Grows
(Bloomberg) -- Abu Dhabi took a cue from Saudi Arabia and cut pricing for its crude as the world’s biggest producers prepare to flood oil markets in a race for market share.
Abu Dhabi National Oil Co. announced forward pricing for the first time on Friday because of the “unprecedented market conditions,” the state-run company said in a statement. Crude had its biggest single-day drop in almost three decades earlier this week after talks between OPEC and Russia on production strategy collapsed, and as the coronavirus continues to decimate demand.
Adnoc will sell its flagship Murban grade at a discount of $2.75 a barrel to the Platts-assessed Dubai price in April. That’s $4.63 less than the grade’s pricing for this month, which Adnoc issued at the same time. Abu Dhabi is home to most of the oil deposits in the United Arab Emirates, the third-largest member of the Organization of Petroleum Exporting Countries.
Until now, Adnoc was the only major Persian Gulf producer setting prices retroactively for crude it shipped the previous month. It plans to begin selling its Murban crude on a dedicated futures exchange in Abu Dhabi later this year. Until that’s ready, the company will shift away from retroactive pricing “to allow customers to better plan their crude purchases in light of the current market situation,” it said.
Middle Eastern producers sell much of their oil under long-term contracts, setting what are known as official selling prices, or OSPs, to let customers know what they’ll pay for future cargoes.
Last week’s failed talks between Saudi Arabia-led OPEC and Russia has resulted in a all-out price war. State-run Saudi Aramco made the deepest cuts in at least 20 years for its main oil grades. Kuwait and Iraq followed soon after. Russian producers have said they can boost output and withstand low prices.
Adnoc said on Wednesday that it would boost crude supply to more than 4 million barrels a day next month, up 33% from what it pumped in February.
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