Saudis raise oil pricing for Asia by most since April 2015

[SINGAPORE] Saudi Arabia raised its pricing for June oil sales to Asia by the most since April 2015, a sign that the world's biggest crude exporter expects demand to recover as the global market rebalances.

State-owned Saudi Arabian Oil Co increased its official selling price for Arab Light crude to Asia by US$1.10 a barrel to 25 cents more than regional benchmarks Oman and Dubai, according to a statement. The company, known as Saudi Aramco, was predicted to raise the grade by 65 cents a barrel, according to the median estimate in a Bloomberg survey of five refiners and traders.

The Middle East producer is boosting the cost of its oil to the largest consuming region as unplanned supply outages and disruptions help to curb a global glut and signs of higher demand emerge. Benchmark prices have rallied more than 60 per cent since mid-February, rebounding from the biggest crash in a generation on expectation that the surplus will shrink as US production declines.

Arab Light's price to Asia for June is the highest since September. It's only the third time the grade is being sold at a premium to the benchmarks since Saudi Arabia spearheaded OPEC's strategy to keep pumping out crude in Nov 2014. The group's decision to maintain output as prices cratered forced a curtailment of higher-cost production eleswhere.

"Refinery demand is expected to recover," said Ehsan Ul- Haq, a senior analyst at industry consultant KBC Energy Economics in London. "Cargoes loaded in June will arrive in Asia in July, when demand will return after the seasonal turnaround period. Saudi Arabia may also use more crude at home in the summer, when electricity usage typically rises." Aramco will sell Arab Medium for June to Asia at US$1.30 a barrel below benchmark prices, and Arab Heavy at a discount of US$2.75 a barrel. The company raised the premium for Arab Super Light crude to Asia by US$1 a barrel to US$3.95 a barrel over benchmarks, and Arab Extra Light by 80 cents a barrel to US$2.60 a barrel.

The differential for Arab Light sold to the US was kept unchanged at a premium of 35 cents a barrel to the ASCI benchmark. Other grades for the U.S. were all lowered by 20 cents month-on-month, resulting in a US$2.40 premium for Extra Light, a US$1.25 discount for Medium and a US$1.75 discount for Heavy.

Europe, Mediterranean Light crude to Northwest Europe was raised by 15 cents to a discount of US$4.45 versus the benchmark. Other grades were also increased except Extra Light. Light crude to the Mediterranean was raised by 25 cents to a discount of US$3.95 versus the benchmark.

BLOOMBERG