Saudi Arabia may have little choice but to reduce the price of its oil as OPEC and allied producers start to ease output curbs amid weakening demand that’s crashed the value of physical supplies.

Aramco is expected to cut the official selling price for its flagship Arab Light grade by 48 cents a barrel for September sales to Asia, the median estimate in a survey of eight traders and refiners across the region shows. It would be the first drop in four months after a series of hikes that came as OPEC+ cut output and consumption recovered as Asian economies emerged from lockdowns.

Saudi Arabia is expected to cut the price of its oil to Asia for September

A reduction in Saudi OSPs could signal a pause or even a reversal in the rapid recovery across oil markets from the coronavirus. While Asia led the world in the demand rebound, crude and product stockpiles remain stubbornly high and the pandemic is still surging or staging a comeback in many countries. Floods and logistical bottlenecks in China in recent weeks have also contributed to a slump in imports, while Indian fuel sales are dropping again.

The state-owned producer didn’t immediately respond to an email seeking comment. Aramco is typically the first among Middle Eastern producers to announce monthly official prices, setting the tone for sellers in Iraq, Kuwait and Abu Dhabi.

The price of spot crude cargoes from Russia to Angola to Brazil has plummeted this month after a pull-back in purchases from top importers including China. Refining margins are still well below five-year lows on a seasonally adjusted basis in the Asian oil hub of Singapore, weighing on the ability of processors in the region to turn a profit and pay more for crude.