Middle East Conflict Disrupts Oil Price Benchmarks, Saudi Aramco Premiums Could Soar to $40/Barrel
Svmuu According to traders, due to the Iran conflict throwing Saudi Arabia's conventional crude pricing into disarray, anxious Asian buyers are attempting to guide the country towards alternative supply pricing mechanisms as oil prices surge. Saudi Aramco is finalizing the costs for oil shipments loading in May, with price lists expected to reach buyers within days. Based on conventional pricing metrics tied to regional benchmarks, the premium for its flagship Arab Light crude is anticipated to soar to an unprecedented level of around $40 per barrel, compared to a premium of just $2.50 in April. Saudi Aramco's monthly contract prices are typically set as a differential relative to a base benchmark, which consists of the Dubai price assessed by S&P Global Platts and the Oman crude futures on the Dubai Mercantile Exchange. Traders indicate that some Asian refiners have requested Saudi Aramco to link its crude to Brent futures, but other alternatives have also been proposed. These include using the Shanghai Futures Exchange's oil price, then deducting transportation and other related costs, or even referencing other crudes such as the UAE's Upper Zakum. Traders at refiners that regularly import crude from Saudi Arabia stated that negotiations between Saudi Aramco and its customers are ongoing, and no final pricing decision has been made. They added that if the premium level is set around $40 per barrel, it could lead to reduced procurement volumes. (Jin10)
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Disclaimer: This content reflects the author's personal views only and does not constitute investment advice.
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