Saudi Arabia has hiked the price of its flagship Arab Light crude 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 upends oil flows and roils markets and prices.
Aramco, the Saudi state oil giant, has raised the price of Arab Light that would be going to Asia next month to a premium of $19.50 above the average Oman/Dubai benchmark, off which supply to Asia is typically priced, Bloomberg reported on Monday, citing a price list it has seen.
The premium is the highest ever in Saudi pricing, although it is below the $40 per barrel premium over Oman/Dubai that some refiners and traders had expected in a survey by Bloomberg.
Saudi Arabia typically announces around the fifth of each month its crude pricing for the following month and doesn’t comment on price changes.
The pricing announcement follows the monthly OPEC+ gatherings at which the producers, led by Saudi Arabia, decide how to maintain market stability.
In the current worst disruption in the history of oil markets, OPEC+ on Sunday agreed to boost oil production by another 206,000 barrels per day (bpd), which will be theoretical only as production in the Middle East remains constrained by the Strait of Hormuz crisis.
Days before it was slated to announce pricing for May-loading cargoes for Asia, the world’s top crude exporter, Saudi Arabia, was under pressure from its buyers to switch to alternative pricing, as the war is upending oil flows and roiling regional benchmarks.
Asian refiners have already priced some orders for U.S. crude oil against the ICE Brent benchmark instead of the typical pricing on Dubai crude, as the Middle Eastern benchmark has seen wild fluctuations amid choked physical supply from the Persian Gulf.
Saudi Arabia is seeking to redirect as many barrels as possible to the Yanbu port on the Red Sea. This export route doesn’t need passage through the Strait of Hormuz, where Iran is now selectively and politically ensuring safe passage through the chokepoint for some vessels.
By Tsvetana Paraskova for Oilprice.com
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