Saudi Arabia raises oil prices for Asia to record levels

Saudi Arabia raises oil prices for Asia to record levels

General view of Aramco tanks and oil pipe at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. (File photo: Reuters)
General view of Aramco tanks and oil pipe at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. (File photo: Reuters)

Saudi Arabia raised oil prices for buyers in Asia to record levels, a sign the world’s largest exporter sees the region’s market remaining tight.

Despite indications that slowing economies are starting to hit global demand for crude, state producer Saudi Aramco increased its Arab Light grade for next month’s shipments to Asian refineries to US$9.80 a barrel above the Middle Eastern benchmark. That is 50 cents than in August.

Still, traders and refiners had expected a bigger jump of $1.50, according to a Bloomberg survey in late July. That was before data emerged this week showing that Americans are driving less than they did in the summer of 2020, when pandemic travel curbs all but halted movement.

Aramco also increased all US grades, with prices for the region going up by 50 cents a barrel. It was the first change Aramco has made for American customers since May.

For Europe, the company lowered light crude varieties and raised medium and heavy types.

The decision came a day after Opec+ -- led by Saudi Arabia and Russia -- responded to months of diplomatic efforts from the US for more oil with one of the smallest production increases in its history.

Oil still fell on Wednesday, with Brent dropping almost 4% to below $100 a barrel, following the US data and as production in Libya recovered.

Crude surged to around $130 a barrel in the wake of Russia’s attack on Ukraine. It has since dropped amid growing concern about the possibility of recessions in the US and Europe.

- Crack spreads drop -

Saudi Arabia sells most of its oil to Asia. China, India, South Korea and Japan are the biggest buyers. 

Aramco’s monthly pricing decisions are seen as a bellwether of the oil market and are often followed by similar moves from other major Persian Gulf producers.

The Saudi company mostly increased prices for heavier Asian grades more than those for lighter ones. Heavier varieties tend to be made into fuels such as diesel, while lighter oil yields more gasoline.

The margins, or crack spreads, that Asian refiners get from turning crude into gasoline have slumped almost 78% from record levels in late June. Those for diesel have fallen by around half as much, according to data compiled by Bloomberg.


Do you like the content of this article?
COMMENT (7)
TRENDING

Air force kicks off joint air force drills with China

Thailand and China kicked off a joint air force exercise on Sunday, the kingdom's military said, the first such drills in years following a pause forced by Covid-19.

18:13

Nitithorn shrugs off pressure to win International Series Singapore

Thailand's Nitithorn Thippong seized the initiative as his rivals faltered on Sunday, closing with a flawless three-under-par 69 to win the International Series Singapore.

17:58

Tourists in Chinese beachside resort city protest Covid lockdown

Tourists in the Chinese seaside resort of Sanya on Hainan Island are protesting after being stranded for over a week due to Covid-19 lockdowns.

17:42