Dubai — Saudi Arabia, the world’s largest oil exporter, raised pricing for sales of all crude grades to Asia for July amid higher demand and better profits for refiners in the region, according to a person with knowledge of the situation.
State-owned Saudi Arabian Oil, known as Saudi Aramco, increased official pricing for Arab Light crude to Asia by 60c, 25c a barrel less than the regional benchmark, said the person who asked not to be identified because the information is not public. The company had been expected to increase pricing by 30c a barrel to Asia, according to a median independent estimate.
The Organisation of Petroleum Exporting Countries and partners, including Russia, agreed on May 25 to extend production cuts for another nine months to reduce global inventories.
While Saudi Arabia’s Energy Minister Khalid Al-Falih said the cuts are working and predicted global inventories would fall to the five-year average in early 2018, American drillers continue to add rigs to shale fields. Brent crude prices have dropped 12% this year.
Saudi Aramco had cut Arab Light pricing to Asia for the past three months as the kingdom was fighting to defend sales in its biggest regional market. It had ceded market share to Opec rivals Iran and Iraq by making deeper cuts in output than it promised under the group’s agreement to curb production.
Middle Eastern producers compete with cargoes from Latin America, North Africa and Russia for buyers in Asia. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.