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Saudi Aramco Cuts Asian Oil Prices Amid Soaring Shipping Costs
Saudi Aramco is charging Asian buyers less for some of its oil.
It cut the price difference for its Arab Light crude by $3 a barrel and cut prices for heavier grades by $5.
But moving oil by ship has become very expensive, so the discounts do not cover all the extra cost.
Asian refiners can also choose oil from countries such as the United States, Iraq and Russia.
That gives them more options when bargaining with Saudi Arabia.
Aramco is charging more for some oil sold to Europe, where buyers have fewer alternatives, and kept US prices unchanged.
Saudi oil shipments have recovered, and the company is offering buyers more loading locations.
The price cuts show Aramco is trying to compete for customers in Asia.
Saudi Aramco cut its Arab Light price differential for Asian buyers by $3 a barrel, bringing it to a six-year low.
Prices for heavier Saudi crude grades were reduced by $5 a barrel.
Shipping a Gulf cargo to Asia can add about $30 a barrel; a Gulf-to-China VLCC time charter costs around $1.2 million per day, versus about $80,000 a year ago.
Aramco raised November prices for northwest Europe and the Mediterranean by $3 a barrel and left US prices unchanged.
The article says recovering Saudi export flows and competition from US, Iraqi and Russian crude are contributing to pressure for discounts in Asia.
- Who
- Saudi Aramco and Asian oil buyers, including refiners in China and India.
- What
- Aramco cut prices for Asian crude while raising some European prices and leaving US prices unchanged.
- Where
- Asian markets, with comparisons to northwest Europe, the Mediterranean and the United States.
- When
- For November crude pricing; the article also refers to exports in mid-September.
- Why
- The article attributes the cuts to strong competition for Asian buyers, high shipping costs and recovering Saudi supply.
Factors supporting lower Asian prices
Factors limiting the benefit
Competition for Asian refiners
Factors supporting lower Asian prices
Asian buyers can source crude from the United States, Iraq and Russia, giving them alternatives and leverage in negotiations.
Factors limiting the benefit
The article says the Saudi price cuts cover only a fraction of the additional freight burden.
Value of the discount to Indian refiners
Factors supporting lower Asian prices
Indian refiners could benefit if lower official selling prices translate into lower delivered costs and help them negotiate better terms.
Factors limiting the benefit
Elevated tanker rates and benchmark prices could offset some or all of the headline discount; the landed cost is the key measure.
Key facts
- Arab Light reduction
- $3 a barrel
- Heavier Saudi grade reductions
- $5 a barrel
- VLCC Gulf-to-China time charter
- Around $1.2 million per day, compared with about $80,000 a year earlier
- Estimated shipping cost to Asia
- About $30 a barrel for a Gulf cargo at current rates
- European price change
- November prices for northwest Europe and the Mediterranean rose by $3 a barrel
- US price change
- Prices were unchanged
- Recovered Middle Eastern shipments
- Estimated at around 98% of prewar levels
- Saudi oil sold to Asian buyers
- Almost 100 million barrels in mid-September
Sources
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