Gulf News reported that Saudi Arabia unexpectedly cut prices for most of its crude for December helping lower costs for refiners and weighing on prices for other similar grades after spot premiums surged to a record.

Traders said that the top oil exporter surprised the market by reducing the official selling prices for 4 of 5 grades by between 5 cents and USD 1.70 per barrel. A Reuters poll showed participants expected an increase in three grades.

The move may have been triggered by a slide in profits from processing a barrel of crude to products such as gasoline and naphtha. Asia's demand for naphtha, the preferred fuel for making petrochemicals has slid as Chinese factories entered a seasonal lull while tighter credit discouraged traders from stocking up polymers.

Vienna based consultancy JBC Energy said that the massive cuts to the kingdom's lighter grades were done on the back of the feeble naphtha crack over the month and a weak outlook for petrochemical demand. The cuts put the price of the Super Light grade at parity with Extra Light for the first time since November 2009 a sure sign that naphtha is weak.

JBC Energy said that the cuts come amid an uncertain global economic growth outlook. The reduction may also be a way for the producer to try and retain its share in the crude market amid an increase in supplies from Libya. The lower OSPs for Asian crudes seem to indicate that Saudi Arabia is content to keep its production at current levels.

(Sourced from Reuters)