Saudi Arabia raised pricing for December oil sales to Asia in a sign the world’s largest crude exporter is confident about strong demand in its biggest market, reports Bloomberg.
State-owned Saudi Arabian Oil Co. increased its official pricing for Arab Light crude to buyers in Asia by 65 cents to $1.25 a barrel more than the regional benchmark, the company known as Saudi Aramco said Thursday in a statement. That is the highest since September 2014 and is well above the 35-cent increase forecast in a Bloomberg survey.
Saudi Arabia has led the Organization of Petroleum Exporting Countries in cutting crude production to shrink a global glut. The kingdom said it would be making its deepest ever supply cuts this month as it seeks to reduce the level of crude in storage. Brent crude prices have rallied 17 percent in the past two months, helped by the prospect that OPEC and partners like Russia will extend their pact to lower output beyond March.
“The Saudis are feeling pretty confident about the demand prospects in Asia even as the region is getting more competitive for crude exporters,” said Edward Bell, a commodities analyst at lender Emirates NBD PJSC in Dubai. “The market is showing all the signs of tightening so that would imply the higher pricing can be absorbed.”
Aramco also increased pricing for buyers in Northwestern Europe and the Mediterranean region. The company raised Arab Light and Arab Heavy crude for the U.S. by 10 cents a barrel while keeping pricing for the Medium grade unchanged and cutting Extra Light.
Global stockpiles are declining and demand is increasing, Khalid Al-Falih, Saudi Arabia’s oil minister, said Thursday at a ministerial roundtable in Bangkok. Russia, which joined OPEC and other producers in the output cuts, sees “recovery” in the global oil industry, Energy Minister Alexander Novak said Thursday during a visit in Riyadh.
Still, crude inventories remain larger than necessary, meaning “the mission is not accomplished yet” for OPEC and its partners, Al-Falih said. Ministers from Kuwait and the United Arab Emirates in Bangkok also said OPEC is discussing whether to extend the production cuts and will review progress at its Nov. 30 meeting in Vienna.
Middle Eastern producers compete with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. 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.