Saudi Arabia was said to raise its pricing for June oil sales to Asia by the most since April 2015, in a sign that the world’s biggest exporter is expecting demand to recover as the global crude market rebalances.
State-owned Saudi Arabian Oil Co. increased its official selling price for Arab Light crude to Asia by $1.10 a barrel to 25 cents more than regional benchmarks Oman and Dubai, said people with knowledge of the matter who asked not to be identified because the information is confidential. The company, known as Saudi Aramco, was predicted to raise its pricing for the grade by 65 cents a barrel, according to the median estimate in a Bloomberg survey of five refiners and traders.
The Middle East producer is increasing the cost of its supplies to the largest oil-consuming region amid unplanned outages and disruptions that have helped curb a global oversupply and as signs of demand emerge. Benchmark prices have rallied more than 60 percent since mid-February, rebounding from the biggest crash in a generation after a global glut prompted by the U.S. shale boom led to an industry downturn.
Arab Light’s price to Asia for June is the highest since September 2015, and it’s only the third time the grade is being sold at a premium to the benchmarks since Saudi Arabia in November 2014 launched OPEC on its market strategy. The group continued to pump supplies even as prices cratered, forcing higher-cost production elsewhere to shut down.
“Refinery demand is expected to recover,” said Ehsan Ul-Haq, a senior analyst at industry consultant KBC Energy Economics in London. “Cargoes loaded in June will arrive in Asia in July, when demand will return after the seasonal turnaround period. Saudi Arabia may also use more crude at home in the summer, when electricity usage typically rises.”
Aramco will sell Arab Medium for June to Asia at $1.30 a barrel below benchmark prices, and Arab Heavy at a discount of $2.75 a barrel. The company also raised the premium for Arab Super Light crude to Asia by $1 a barrel to $3.95 a barrel over benchmarks, and Arab Extra Light by 80 cents a barrel to $2.60 a barrel.
The Organization of Petroleum Exporting Countries, of which Saudi Arabia is the largest producer, abandoned its production target at its most-recent meeting in December. The group has pumped more than the previous 30 million-barrel-a-day target since June 2014. Saudi Arabia produced 10.27 million barrels a day in April, according to data compiled by Bloomberg. OPEC is scheduled to meet June 2 in Vienna.