Asian Buyers Forced to Pay More for Saudi Crude on Supply Crunch

(Bloomberg) -- Saudi Arabia, the world’s biggest oil exporter, hiked June pricing for all crude grades to Asia just as the region scrambles for replacement barrels to make up for a supply shortfall.

The kingdom raised its official selling price of Arab Light crude for June to the biggest premium to Middle East benchmark prices in 11 months, increasing the cost of its flagship grade to Asia by more than traders had forecast. The price of Arab Medium crude was set at the highest since December 2013, while Arab Heavy was priced at the most in more than six years.

The spike in prices for Asian buyers comes as refiners across the top oil-importing region seek more Saudi Arabian crude for June and July loading after the expiration of U.S.-issued waivers permitting imports of Iranian oil. A fall in supplies from Iran -- coupled with declining exports from Venezuela and outages across Africa -- are creating a sellers’ market, handing crude producers the upper hand in negotiations and sales.

Key Insights

  • Flagship Arab Light grade rises 70 cents to $2.10 a barrel over the Oman-Dubai benchmark, the biggest spread for the grade since July.
  • June pricing follows increases in Asia for May, reflecting short supply of heavy crudes in market.
  • Saudi Arabia is the first Gulf producer to release forward pricing each month and many countries price their crudes off of Aramco’s.
Asian Buyers Forced to Pay More for Saudi Crude on Supply Crunch
  • OPEC and its allies are committed to reducing supply of the heavy, high-sulfur grades that Saudi Arabia and other Gulf producers pump. U.S. companies are boosting supply of lighter grades from shale deposits.

Know More

  • Aramco raised pricing to all buyers in Northwest Europe, and boosted pricing for most grades to the Mediterranean region. The company, however, cut its official selling prices for all grades to buyers in the U.S.
  • Click here for a table of global OSPs.

©2019 Bloomberg L.P.