SINGAPORE: Saudi Arabia may slash price premiums on all crude grades it sells to Asia in February to one-year-lows despite the escalation of tensions in the Red Sea, as concerns intensify that supply may outpace demand.

The world’s top oil exporter could cut the official selling price (OSP) for its flagship Arab Light crude over Oman/Dubai crude quotes by about $1.70 a barrel in February from the previous month, according to five refining sources surveyed by Reuters, which would be the grade’s lowest premium in a year.

The Asian physical oil market weakened sharply over the past month, with the price spread between benchmark Dubai’s first- and third-month averaging only $0.17 a barrel in December versus $1.70 a barrel in November, reflecting expectations of less supply tightness in the near term.

While the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, agreed to cut output by a combined 2.2 million barrels per day for the first quarter, market participants questioned whether producers would comply with the pact.