Saudis raise some Asia crude pricing as U.S. sanctions Iran oil
DUBAI (Bloomberg) -- Saudi Arabia raised pricing for the medium and heavy crudes it sells to Asia, a sign that OPEC’s biggest producer sees robust demand for the grades as it boosts output to offset the impact of energy sanctions on Iran.
State-owned Saudi Aramco increased its official selling price for December sales of medium crude to Asia by $0.20, to $0.70/bbl more than the Middle East benchmark, the company said Monday in an emailed statement. That puts the medium grade at its highest premium since January 2014. Aramco raised pricing for heavy crude by $0.40, narrowing a discount to the benchmark to $0.25/bbl. Both grades are similar to Iranian crude.
The U.S. today reimposed sanctions on Iran’s energy industry and other parts of its economy, seeking to drive the Persian Gulf state’s exports out of the market. Saudi Arabia is a linchpin in President Trump’s effort to slash Iran’s crude shipments, with the kingdom pledging to make up for any shortfalls in global supply.
The higher Asia pricing for Aramco’s medium and heavy crudes suggests that the company, known formally as Saudi Arabian Oil, expects the market for those grades to tighten. The Brent-Dubai spread, a measure of the price difference between light and heavier crudes, is near its narrowest in a year, according to data from PVM Oil Associates. Middle Eastern oils, including the Dubai benchmark, are generally heavier than Brent and other European crudes, making them more difficult to refine.
U.S., Europe
Aramco cut monthly pricing for Arab Light crude to Asia by $0.10 to $1.60/bbl more than the benchmark. Four traders in a Bloomberg survey had forecast a $0.20 reduction in the grade.
The company raised pricing on all of its grades to the U.S. and to Northwest Europe. It cut most crudes to the Mediterranean region, increasing pricing only for its heavy grade.
OPEC and its allies are in a “produce as much you can mode” to meet demand and replace any looming shortages, Saudi Energy Minister Khalid Al-Falih said last month at a conference in Riyadh. The country pumped 10.68 MMbpd in October, according to data compiled by Bloomberg, and it could soon be pumping 11 MMbpd if markets need it, Al-Falih said in an interview with Russia’s TASS news agency published Oct. 22.
Saudi crude pricing to Asia, the biggest market for Middle East crude, is widely watched by traders and refiners as a barometer for demand. Saudi Arabia is the first producer each month to set forward pricing levels for cargoes to be loaded the following month, and fellow producers like Iraq and Iran follow the Saudi lead in setting their prices.
Companies in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil producers price their crude at a premium or discount to a benchmark.
