Saudi Arabia hiked official selling prices for all of its oil sales to Asian customers in May, days after the kingdom led a surprise OPEC+ output cut.
State-owned Saudi Aramco raised its selling price for flagship Arab Light crude to Asia by 30 cents a barrel, boosting prices for a third consecutive month, according to price sheets seen by Bloomberg. Traders who were surveyed before the shock OPEC+ decision had expected Arab Light prices to fall by 43 cents a barrel.
Oil rallied as much as 8.4% on Monday, the most in more than a year, after an unexpected decision by the Organization of Petroleum Exporting Countries and its allies to cut more than 1 million barrels in daily output starting next month. Saudi Arabia, the cartel’s de facto leader along with Russia, agreed to slash production by 500,000 barrels a day.
The move blindsided the global crude market and prompted some banks to hike their price forecasts.
Traders and refiners had been eagerly awaiting the release of Saudi official prices since the start of this week on expectations of an OSP hike. Some buyers were also concerned about potential cuts in their cargo liftings from Aramco, or so-called allocations, prompting them to begin speaking with other non-OPEC+ suppliers for replacement or alternative supplies. Prices for U.S. buyers also rose.
“These prices show that, despite the production cuts they announced, the Saudis still expect strong Asian demand,” said Giovanni Staunovo, commodity analyst at UBS Group AG. “For the U.S., it may be possible that less supply will be flowing to the region with the higher prices.”
Saudi Aramco can shape the overall amount of oil it exports in a given month through the setting of its official prices relative to those other competing suppliers. It can also do so via an allocation process where it decides how much of each grade it will supply to each customer. Allocations are typically known by the 10th of each month.
The producer also maintained prices for customers in northwest Europe and the Mediterranean.
Aramco sells about 60% of its crude shipments to Asia, most under long-term contracts, pricing for which is reviewed monthly. China, Japan, South Korea and India are the biggest buyers.
The company’s pricing decisions are often followed by other Gulf producers such as Iraq and Kuwait.
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(Bloomberg News writer Bill Lehane contributed to this story.)
