Tags: saudi | arabia | oil | prices | crude

Saudi Arabia Moves to Prop Up Oil Market Setting Higher Prices

Saudi Arabia Moves to Prop Up Oil Market Setting Higher Prices

Thursday, 07 May 2020 12:02 PM

Saudi Arabia moved to prop up a nascent recovery in the energy market by raising crude prices for its customers worldwide, triggering a rally in oil futures.

State-owned Saudi Aramco increased pricing for most of its grades for shipment in June, according to a price list seen by Bloomberg. The world’s biggest exporter is simultaneously cutting production as part of a global pact aimed at tightening supply and buttressing prices. Brent crude gained as much as 7%.

Saudi Arabia -- which started a merciless price war in March that crashed the market -- is now indicating it’s determined to do whatever it takes to support an oil price recovery.

The kingdom narrowed discounts most notably for Europe and the Mediterranean, the main market for Russian crude. That appears to be a signal to the Kremlin after Riyadh and Moscow agreed last month to work together again through the OPEC+ alliance and bring the price war to an end.

Output Cuts

Saudi Arabia began paring production late last month, after the Organization of Petroleum Exporting Countries and its partners, including Russia, agreed to slash output by 9.7 million barrels a day starting May 1. Oil prices have plunged this year and many drillers may stop pumping at wells that are no longer profitable.

Raising prices to the U.S. will make Saudi barrels less attractive in a market where the main crude benchmark went negative last month. Selling less in the U.S. may also help appease President Donald Trump who helped orchestrate last month’s historic production-cutting agreement and who has threatened tariffs against Saudi crude imports. Trump is keen on protecting U.S. jobs in the oil industry in an election year.

By increasing pricing for Asia, Aramco is also indicating it sees demand beginning to recover in its largest regional market. The company is reversing three consecutive months of reductions in pricing for the world’s largest oil-consuming region.

Aramco raised its official selling price for flagship Arab Light crude to buyers in Asia by $1.40 a barrel, to a discount of $5.90 below the Middle East benchmark. The company was expected to reduce its official pricing by $2.50 a barrel, to a discount of $9.80, according to the median estimates in a Bloomberg survey of seven traders and refiners.

© Copyright 2020 Bloomberg News. All rights reserved.


   
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Saudi Arabia moved to prop up a nascent recovery in the energy market by raising crude prices for its customers worldwide, triggering a rally in oil futures.
saudi, arabia, oil, prices, crude
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2020-02-07
Thursday, 07 May 2020 12:02 PM
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