Saudi Aramco Raises Asia Oil Prices Amid High Refiner Profit

Oil Markets Shrug Off Saudi-Iran Tension
  • Most Saudi pricing for U.S. buyers unchanged for February
  • Aramco cuts pricing for February sales to Northwest Europe

Saudi Arabia, the world’s largest crude exporter, raised pricing for all February oil sales to Asia amid higher refining margins in the region. It kept levels unchanged for most grades sold to the U.S. as producers compete for market share amid a global supply glut.

State-owned Saudi Arabian Oil Co. increased its official selling price for Arab Light crude sold to Asia by 60 cents a barrel to 80 cents below the regional benchmark, it said in an e-mailed statement. The company, known as Saudi Aramco, was expected to narrow the grade’s discount by 55 cents a barrel, according to the median estimate in a Bloomberg survey of six refiners and traders.

Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, is competing for market share amid a global supply glut that cut prices 35 percent last year. The kingdom pumped 10.25 million barrels daily in December, according to data compiled by Bloomberg. Lower crude costs are helping boost returns for oil refiners in Asia, the region where most Middle Eastern crude is sold.

“That’s the market where refining margins are the most attractive,” Richard Mallinson, an analyst at Energy Aspects Ltd., said by phone from London. “Aramco’s aim is to achieve the best prices without going in at a level that would make their crude less competitive against other grades.”

Supply Glut

Brent crude dropped from more than $100 a barrel in June 2014 to trade at about $37 Tuesday after OPEC ramped up output amid swelling shale oil supplies from the U.S. The profit that refiners in Asia make from turning crude into gasoline and diesel rose from $15.93 a barrel on Nov. 30 to $17.66 a barrel on Dec. 31, data compiled by Bloomberg show.

Saudi Aramco reduced the premium for Arab Extra Light crude to the U.S. by 50 cents a barrel to $2.35 a barrel more than the benchmark and kept price differentials for all other grades to the U.S. unchanged from January.

The company widened discounts for sales of all grades of crude to Northwest Europe for February, while keeping discounts for all crudes but Arab Light unchanged for buyers in the Mediterranean region.

Saudi Arabia won’t limit production and will seek to supply any demand from the market, Ali Al-Naimi, the country’s oil minister, said Dec. 30 on state television. OPEC decided last month to set aside any formal target for production. The group has exceeded its previous target of 30 million barrels a day since May 2014, data compiled by Bloomberg show.

Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia. Producers in the Persian Gulf 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.