(MENAFN- Gulf Times) Saudi Arabia, the world's largest crude exporter, increased the pricing terms for Arab Light sold to Asia by the most in three years as demand improved.
Abu Dhabi raised its export prices for the first time since June.
State-owned Saudi Arabian Oil Co said on Tuesday it will sell cargoes of Arab Light in April at 90 cents a barrel below Asia's regional benchmark. That narrows the discount by $1.40 from March, the biggest price increase since January 2012, according to data compiled by Bloomberg. The company also raised prices it offers to refiners in the US
"We expected an increase, but the degree of increase is on the higher side of expectations," Eugene Lindell, a senior analyst at JBC Energy GmbH in Vienna, said Tuesday by phone. "The Asian market is a little bit stronger compared to the last months," and Aramco's adjustments reflect that strength.
Three months after Saudi Arabia made clear it would defend market share against rising US production rather than cut output to support prices, the strategy is showing signs of working, according to banks including Standard Chartered and Bank of America Corp.
Oil producers outside the Organisation of Petroleum Exporting Countries are curbing investment and idling drilling rigs. Demand is growing and the market is calm, Saudi Oil Minister Ali al-Naimi said on February 25.
"Saudi Arabia has committed to staying with its policy of flooding the market with crude," John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said Tuesday by phone. "The Saudi pricing formula is a technical methodology."
Output in Saudi Arabia climbed 130,000 barrels to 9.85mn a day in February, the highest level since September 2013, according to a Bloomberg survey of oil companies, producers and analysts.
Demand from Asian refiners increased, while weather disruptions to Iraqi exports constrained supply, Lindell said. Iraq exported 2.3mn bpd from the southern oil hub of Basra last month, compared with about 2.4mn in January, according to the country's Oil Ministry.
The narrowing of the April discount is a reflection of "stellar refining margins" in Asia, Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd, said by e-mail from London.
Abu Dhabi National Oil Co, which provides prices for crude shipped the previous month, raised its main Murban grade to $56.55 a barrel in February from $46.40 in January, according to an e-mailed statement from the company yesterday.
Oil fell almost 50% in 2014 before rebounding 5.8% this year, with Brent crude in February posting its first monthly gain since June.
Middle Eastern producers are increasingly competing in Asia with cargoes from Latin America, North Africa and Russia. Exporters in the Gulf sell mostly under long-term contracts to Asian refiners at a premium or discount to the average of regional benchmarks Oman and Dubai crude.
Aramco's discount on March sales of Arab Light to Asia of $2.30 a barrel was the widest in at least 14 years, when Bloomberg began compiling the data. Iraq, Kuwait and Iran joined Saudi Arabia in cutting their March crude prices for Asia in a signal the competition for market share that began last year was continuing.
The change in the Arab Light discount for April was bigger than the median estimate of $1.10 a barrel in a Bloomberg News survey of 10 refiners and traders. Aramco also increased the price, relative to regional benchmarks, of the other four grades of crude it ships to Asia and all four it offers to US refiners.
Al-Naimi expects oil price to stabilise
Reuters
Berlin
Saudi Arabia's oil minister said yesterday he expected oil prices, which hit a near six-year low in January, to stabilise, signalling cautious optimism about the market outlook.
Giving a speech in the German capital, Ali al-Naimi also urged non-Opec producers to help balance the oil market, saying it was not up to Saudi Arabia to subsidise higher-cost producers and that circumstances required non-Opec to co-operate.
"Going forward, I hope and expect supply and demand to balance and for prices to stabilise," al-Naimi said. "Global economic growth seems more robust."
The comments are a further sign Opec's top producer is sticking to its policy to defend market share. Last month, he signalled satisfaction with developments, saying he saw oil demand growing and that markets were "calm".
Oil prices collapsed from $115 in June due to oversupply, in a decline that deepened after Saudi Arabia and the rest of the Organisation of the Petroleum Exporting Countries at a November meeting refused to cut output.
At the meeting, Saudi Arabia and other Gulf Opec-members argued that the group needed to ride out lower prices in order to defend market share against higher-cost shale oil and other competing supply sources, rather than cut output.
Officials from Russia and some other non-Opec nations held talks with Opec ministers on the sidelines of the meeting. But no agreement on cutting supply was reached, Opec left its output steady and prices fell further.
Oil's drop has hurt smaller Opec members and hit Russia's economy hard. Some in Opec continue to lobby for output cuts and an emergency Opec meeting, and last month Igor Sechin, the head of Kremlin-controlled energy giant Rosneft, criticised Opec for destabilising the oil market.
But al-Naimi yesterday said Saudi would not act alone and he was not aware of any plans for a special Opec meeting. The next Opec meeting is not until June.
"In co-operation with many countries we have moderated production levels to improve the market situation. But now the situation is different. We need every major producer to co-operate," he said.
"It makes absolutely no sense for the most efficient producers to be the ones to cut production when we are only 30% of the producers."
He defended Opec's November decision and said Saudi Arabia would not cut its output unless buyers asked for less.
"In November, Opec made an historic decision, it did not interfere in the market. I think history will prove that this was the correct path forward," he said.
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