Saudis to Boost Asia Oil Price in Show of Confidence Over Demand

by Ship & Bunker News Team
Friday May 6, 2016

A price hike of Arab light crude by $1.10 per barrel to 25 cents more than benchmarks Oman and Dubai is being perceived by analysts Thursday as a clear signal that Saudi Arabia anticipates a resurgence of global demand.

The price increase by state-owned Saudi Arabian Oil Co. (Saudi Aramco) was for June oil sales to Asia and is the biggest hike since April of last year; a Bloomberg survey had estimated the company would have raised its grade by 65 cents per barrel.

Ehsan Ul-Haq, a senior analyst at KBC Energy Economics, noted that "Refinery demand is expected to recover; cargoes loaded in June will arrive in Asia in July, when demand will return after the seasonal turnaround period.

"Saudi Arabia may also use more crude at home in the summer, when electricity usage typically rises."

The Saudis are said to have upped the cost of oil as supply outages and disruptions help reduce the global glut; it is only the third time light crude is being sold at a premium to the benchmarks since the kingdom in late 2014 led the Organization of the Petroleum Exporting Countries' decision to keep pumping crude and squeeze higher-cost production elsewhere. 

Meanwhile, light crude to Northwest Europe and to the Mediterranean was raised by 15 cents and 25 cents to a discount of $4.45 and $3.95 versus the benchmark, respectively; other grades were also increased except Extra Light.

Earlier this week, Matthew Weatherly-White, founder of the Caprock Group, stated that the Saudis are selling a piece of Saudi Aramco because they fear that the value of the commodity they are famous for may decline considerably in the foreseeable future.