Aramco plans to cut official oil selling prices in November For its customers in Asia

  • 30 September, 2021
  • 3:01 pm EEST

While the oil markets are waiting for the fifth of the month, when Aramco usually announces the official selling prices for crude to its customers around the world, sources expected the Saudi company to reduce prices for its customers in Asia.

Industry sources said Saudi Arabia, the largest oil exporter, may lower November crude prices for its customers in Asia, although benchmarks in the Middle East posted a broader decline this month, Reuters reported.

The sources indicated that the Saudi company, which usually sets prices based on the monthly change in the standard market structure in Dubai, is expected to exceed the usual pricing formula after it actually reduced selling prices in October.

Oman and Dubai crude prices

This comes at a time when the Sultanate of Oman raised the official selling prices for Omani crude, for November delivery, by $3.40 to $72.78 a barrel.

The official selling price of Dubai crude was set at $72.58 per barrel in November, after it was decided to be at a discount of $0.20 per barrel from the price of Omani crude on the DME.

Saudi raw materials prices

The sources expected that the November official selling price for Arab Light crude would drop by 20 cents, explaining that if Aramco sets prices based on its formula; She will have to reduce it by 70-80 cents.

“Last month Saudi Arabia cut more than expected, and this month we don’t think it will be very generous,” one of the sources said.

Aramco lowered oil prices for all grades of Asian customers in October versus September, but left prices flat in Northwest Europe and the United States.

The OSP for Arab Light Crude to Asia in October was a premium of $1.70 per barrel against the DME and Dubai Platts average.

The spread in September was a premium of $3 a barrel, the highest since February 2020.

The sources indicate that the largest price reductions range between 20 and 40 cents for the heavy grades – Arab Medium and Arab Heavy -, after abundant supplies continued to affect the value of these grades.

Oil demand

One of the sources said Banoco Arab Medium crude, which is similar in quality to Saudi Arabian Medium crude, traded this month at 30-50 cents lower than Oman crude for loading cargoes in November.

However, a third source said that strong fuel oil margins could support prices, as consumers turn to oil for electricity after the LNG price hike.

Rising LNG prices have widened the gap with oil prices and could boost oil demand in Asia by an average of 400,000 barrels per day over the next two quarters, according to consultancy Rystad Energy.

Aramco usually issues the official selling prices on the fifth of every month, and sets the direction for Iranian, Kuwaiti and Iraqi prices; This affects about 9 million barrels per day of crude destined for Asia.

The oil giant Saudi Aramco sets its crude prices based on customer recommendations and after calculating the change in the value of its oil over the past month, based on revenues and product prices.

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