SINGAPORE - Top oil exporter Saudi Arabia on Tuesday lowered the price of its flagship Arab Light crude to Asian customers in January for the first time in seven months, sources familiar with the matter said, reacting to weakening premiums in the physical market amidst supply overhang concerns.

Saudi Aramco cut the official selling price (OSP) for January-loading Arab Light to Asia by 50 cents a barrel from December to $3.50 a barrel over Oman/Dubai quotes, the sources said.

The price reduction is smaller than the market expectation of a trim of about $1, showed a Reuters survey.

"Saudi set the price too high. That could prompt some buyers to nominate less cargoes and turn to buy cheaper crude from other suppliers from the spot market," said a purchase manager from an Asian refinery.

Oil at similar quality as Arab Light, such as Oman crude and Upper Zakum from Abu Dhabi, is valued at around $0.5 a barrel over the Dubai quotes.

The OPEC+ last week announced a combined 2.2 million barrels-per-day (bpd) voluntary output cuts for the first quarter of 2024, but the market was unimpressed and showed skepticism about compliance over the cuts.

Saudi Energy Minister, Prince Abdulaziz bin Salman, told Bloomberg News on Monday that OPEC+ oil production cuts can "absolutely" continue past the first quarter if needed.

Saudi Aramco also lowered the prices for other grades it sells to Asia, with Extra Light crude by 50 cents, while Arab Medium and Arab Heavy by 60 cents and 30 cents, respectively. All the reductions are smaller than the market forecasts.

For other regions, the top oil exporter slashed its January Arab Light OSP to northwest Europe by $2 to $2.90 a barrel above ICE Brent.

Meanwhile, the OSP of Arab Light to the United States was cut by 30 cents to $7.15 versus ASCI in January.

 (Reporting by Muyu Xu; Editing by Jane Merriman and Bernadette Baum)