Saudi Aramco Oil Price Hike Amid Robust Demand

Published: 6 June, 2016 16:14

Saudi Arabia, the world’s largest crude exporter, raised pricing on most oil grades for sale to Asia and the U.S. in July after the nation’s energy minister said demand was robust.

State-owned Saudi Arabian Oil Co. increased its official selling price for Arab Light crude by 35 cents a barrel to 60 cents more than the regional benchmark for sales to Asia, it said in an e-mailed statement.

The company, known as Saudi Aramco, was expected to raise the premium for shipments of Arab Light crude by 40 cents a barrel to 65 cents a barrel more than the benchmark for buyers in Asia, according to the median estimate in a survey by Bloomberg of five refiners and traders in the region last week.

Oil has rallied about 80 per cent since January, making ministers of the Organization of Petroleum Exporting Countries (OPEC) confident that their two-year strategy of trying to win market share is working.

OPEC agrees to stick to policy

OPEC agreed on Thursday (June 2) to stick to its policy of unfettered production with ministers united in their optimism that oil markets are improving. European benchmark Brent crude gained as much as 0.9 percent to $50.10 a barrel in London trading. The July pricing sets Aramco’s light crude grades at the highest levels for Asia since at least September 2014, before OPEC adopted its market share strategy.

“This shows that they’re getting more bullish on demand,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai and a non-resident fellow at the Brookings Institution in Doha, said on Sunday (June 5). “India is showing a lot of strength and we’re still seeing very robust demand from China.”

According to the statement Atramco raised pricing on most grades for sale to Asia, leaving only the Extra Light blend unchanged. It raised the premium for Super Light crude by 10 cents, to $4.05 a barrel more than the benchmark. Medium crude will sell at a $1 a barrel discount in July, 30 cents higher than in June.

Increased supply

The Dhahran-based company is adding about 250,000 barrels a day of Arab Extra Light crude capacity with the expansion of the Shaybah field in the country’s southeastern Rub Al-Khali desert, it said in its annual review last month. The increased supply to 1 million barrels a day may explain why the company kept the grade’s level unchanged at a premium of $2.60 a barrel, Mills said and added that the improved demand in Asia helps Aramco to continue competing for market share even with the higher pricing.

The company also increased pricing for U.S. buyers on all grades except Extra Light. Arab Light crude for U.S. buyers increased by 20 cents a barrel, to 55 cents more than the regional benchmark, according to the statement. The statement also said that Aramco deepened discounts for all grades to buyers in Europe.

Demand is robust

Saudi Arabia’s Energy Minister Khalid Al-Falih, who is also chairman of Saudi Aramco, told reporters in Vienna on Thursday (June 2) that demand is robust and that non-OPEC supply is declining. Global demand is expected to expand by 1.2 million barrels a day this year after growing 1.5 million barrels a day last year, according to OPEC’s final press statement on the Thursday.

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