Saudi Arabia Hikes Prices for Asian Oil Sales After OPEC+ Cuts

Saudi Arabia hiked official selling prices for all of its oil sales to Asian customers in the month of May after the kingdom led a surprise OPEC+ output cut.

(Bloomberg) — Saudi Arabia hiked official selling prices for all of its oil sales to Asian customers in the month of May after the kingdom led a surprise OPEC+ output cut.

State-owned Saudi Aramco raised its selling price for flagship Arab Light crude to Asia by 30 cents a barrel, boosting prices for a third consecutive month. Traders who were surveyed before the shock OPEC+ decision had expected Arab Light prices to fall by 43 cents a barrel.

Oil rallied as much as 8.4% on Monday, the most in more than a year, after an unexpected decision by the Organization of Petroleum Exporting Countries and its allies to cut more than 1 million barrels in daily output starting next month. Saudi Arabia, the cartel’s de facto leader along with Russia, agreed to slash production by 500,000 barrels a day.

The move blindsided the global crude market, prompting many banks to jack up price forecasts, although some bears remain.

Read More: $100 Oil to Tighter Markets: Top Analysts Weigh In on OPEC+ Cuts

Traders and refiners had been eagerly awaiting the release of Saudi official prices since the start of this week on expectations of an OSP hike. Some buyers were also concerned about potential cuts in their cargo liftings from Aramco, or so-called allocations, prompting them to begin speaking with other non-OPEC+ suppliers for replacement or alternative supplies.

Saudi OSPs for Asia (differentials against benchmark Oman/Dubai pricing):

Saudi Aramco can affect and control the overall amount of oil it exports in a given month through the setting of its official prices relative to other competing suppliers, or via the allocation process where it decides how much of each grade it will supply to each customer.

Aramco sells about 60% of its crude shipments to Asia, most of them under long-term contracts, pricing for which is reviewed each month. China, Japan, South Korea and India are the biggest buyers.

The company’s pricing decisions are often followed by other Gulf producers such as Iraq and Kuwait.

More stories like this are available on bloomberg.com