ASX 200 energy shares finished broadly in the red today.
This comes as the S&P/ASX 200 Index (ASX: XJO) snuck into the green, finishing up 0.07% after spending most of the day in the red.
The Index wasn't helped by ASX 200 energy shares. Santos Ltd (ASX: STO), for example, finished down 1.76% to $6.14 per share.
Woodside Petroleum Ltd (ASX: WPL), meanwhile, ended the day 1.66% lower and the Oil Search Ltd (ASX: OSH) share price closed down 2.35%.
So what put the big energy stocks under pressure today?
The answer sits with the world's biggest oil producer, Saudi Arabia.
Image source: Getty Images
How is Saudi Arabia moving the oil price?
ASX 200 energy shares held up reasonably well last week when OPEC+ moved forward with its stated plans to increase the group's oil output. OPEC+ lifted its production target by 400,000 barrels per day (bpd).
In the latest move to impact crude prices, Saudi Arabia has reduced the official selling price (OSP) of Arab Light crude for its Asian customers far more than traders had been expecting.
The result has seen Brent crude fall by more than 1% overnight, currently trading for US$71.84 (AU$97.08) per barrel. And it appears investors in ASX 200 energy shares were taking note.
Warren Patterson, the head of commodities strategy at ING Groep in Singapore said (quoted by Bloomberg), "The level of cuts in Saudi OSPs for Asia was a surprise, and it does not send a great signal to the market regarding current demand dynamics."
The move may be driven by the resurgent Delta strain which has seen an increasing number of nations reinstate travel restrictions, cutting demand for oil. This saw some of state-owned producer Saudi Aramco's Asian customers scale back their crude orders in August.
As Bloomberg notes, Saudi Arabia "sells all of its oil on long-term contracts to refiners". So setting the monthly price too high could see these customers shop for their energy needs elsewhere.
According to Giovanni Staunovo, a commodities analyst at UBS Group:
Because of the high Saudi OSPs in previous months, traders have diverted to the spot market instead of using long term contracts. With domestic demand likely leveling off in autumn, they have more barrels to be exported, so that's another reason to offer more attractive OSPs.
Aramco cut the price for Arab Light crude by US$1.30 a barrel, while the consensus forecast had been for a cut of 60 US cents.
How have these ASX 200 energy shares been performing?
The 3 ASX 200 energy shares listed above were all down today, yet they have had significantly different results this year.
The Oil Search share price is down 1.3% in 2021. Meantime, the Santos share price is down 5.3% year-to-date.
But it is the Woodside Petroleum share price that has struggled the most, down 15.4% so far this calendar year.
By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 12% over that same time.
