Saudi Arabia has reduced the official selling price of its flagship crude loading for Asia in June from the May record high, but the price cut was less than expected.
Next month’s supply from the world’s top crude exporter would still see the second-highest premium to benchmarks in history.
Saudi oil giant Aramco has announced that its flagship Arab Light grade loading for Asia in June would be priced at $15.50 per barrel above the Oman/Dubai average, off which Middle Eastern producers price their crude going to Asia. That’s a price cut of $4 per barrel compared to the record high $19.50 premium for May, but it is smaller than traders and refiners in Asia had expected.
In early April, Saudi Arabia hiked the price of Arab Light loading for Asia in May to a record-high premium over the Middle Eastern benchmarks as the de facto closure of the Strait of Hormuz upended oil flows and roiled markets and prices.
Industry sources in a Reuters survey last week expected Saudi Arabia to reduce the June official selling price (OSP) of the Arab Light crude by between $5 and $12 per barrel compared to the Oman/Dubai average. A Bloomberg survey had pointed to refiners and traders expecting an $8 a barrel cut for June loadings.
Yet, the premiums could vary widely from the OSP because the pricing includes supply from Ras Tanura on the Persian Gulf, which, as of Wednesday, doesn’t have a way of passing the Strait of Hormuz.
For supplies from Yanbu on the Red Sea—Saudi Arabia’s only export port bypassing the Strait of Hormuz—the prices and costs could be higher, traders and buyers say.
The Saudi pricing “assumes loadings from Ras Tanura, which sits in the Persian Gulf. This is clearly not happening. Instead, crude is being loaded at Yanbu on the Red Sea coast,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Wednesday.
“As a result, final prices may be higher to reflect the logistical costs of shipping from the Red Sea,” the strategists noted.
By Tsvetana Paraskova for Oilprice.com
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