In an effort to take advantage of a brief increase in demand for Middle Eastern crude, Saudi Aramco has raised pricing for December sales of all oil grades to Asia, according to Bloomberg.
The company increased its pricing for Arab Light crude to Asia by 90 cents a barrel, to a premium of 45 cents over the regional benchmark. In fact, it had been expected to raise pricing for shipments of Arab Light by 85 cents a barrel, according to the median estimate of six refiners and traders in the region polled by Bloomberg.
The increase in Asian pricing was probably intended to take advantage of a backwardation in the Oman/Dubai benchmark price, where near-term prices are higher than longer-term futures prices, Edward Bell, a commodities analyst at Emirates NBD PJSC, said to Bloomberg. “Generally that’s a reflection of a tighter market now than is expected two or three months down the line,” he said.
Middle Eastern producers are competing with cargoes from Latin America, North Africa and Russia for buyers in Asia, their largest market. Producers in the region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia, the benchmark is the average of Oman and Dubai oil grades.
Saudi Aramco also raised the pricing of all grades to northwest Europe, and all grades to the Mediterranean except Arab Heavy, which it left unchanged. It cut pricing of the Arab Heavy grade to the U.S. by 40 cents, and left the other grades unchanged.
