State-owned Saudi Arabian Oil Co. narrowed the discount for its Arab Light grade to Asia to the least since December, setting the crude at a discount of 60 cents a barrel to the regional benchmark, the company said in an e-mailed statement. The May pricing is 30 cents higher than in April. The company known as Saudi Aramco also increased the pricing of the other four grades it ships to Asia.
The producer cut pricing for May sales of Light crude to the U.S. by 10 cents a barrel and to Northwest Europe by 20 cents, according to the statement.
Brent, a global oil benchmark, fell almost 50 percent in the past year as the Saudis and other OPEC members chose to protect their market share rather than cut production to boost prices. The Organization of Petroleum Exporting Countries decided on Nov. 27 to keep its output target unchanged in the face of burgeoning supply from areas including North America.
Global crude use is improving, and Saudi Arabia can meet demand from any customer, Oil Minister Ali al-Naimi said at a conference in Riyadh on March 23. The kingdom was pumping at a near-record level of about 10 million barrels a day, he said.
‘Less Worried’
Aramco and other Middle Eastern producers cut pricing to Asia earlier this year to compete with cargoes from Latin America, Africa and Russia. Persian Gulf nations sell mostly under long-term contracts to Asian refiners at a premium or discount to the average of regional benchmarks Oman and Dubai crude.
“It seems that the Saudis have established a good market share in Asia, and they are less worried by competition from other producers than they used to be early in the year,” Essam al-Marzouk, a Kuwait-based analyst and former vice president for Europe at Kuwait Petroleum International, said Sunday in an e-mailed statement. “That’s why they are comfortable now with driving their official selling prices up a little bit.”
Saudi Arabia must be prepared to defend its position in Asia as Latin American producers supply more crude to the region, he said.
“Asia now has more options to source crude oil supply,” Sushant Gupta, head of Asia downstream research at consultants Wood Mackenzie Ltd., said March 30 in an e-mailed statement. Saudi market share in Asia will decline by 2020 if it fails to boost exports to the region, according to Wood Mackenzie.
rockman on Sun, 5th Apr 2015 10:02 pm
The KSA can raise their prices all the want. The refiners aren’t going to pay more for oil if it reduces their profit margins for products below an acceptable level. The only control the oil sellers have is how much they sell. And that could be the motivation for increasing prices: to reduce the volume they inject into the market. OTOH I don’t think that rather small increase will have much effect either way.
Nony on Mon, 6th Apr 2015 4:50 am
I agree that a little rise (or lower) in Saudi price is not so interesting. What would be more relevant is showing the spread from prices they charge in the US and in Asia. It’s more than just a transport difference.