Saudi Arabia kept pricing for its main crude grade to Asia unchanged for a second month as the world’s largest crude exporter responds to slower seasonal demand.
State-owned Saudi Arabian Oil Co., known as Saudi Aramco, set the official pricing for Arab Light crude to Asia at a premium of $1.65 a barrel more than the regional benchmark, it said Sunday in an emailed statement. It’s the first time since 2007 that the Asia Light pricing was kept unchanged for two months in a row, according to data compiled by Bloomberg. Aramco was expected to cut pricing by 5 cents a barrel, according to the median estimate in a Bloomberg survey of five refiners and traders.
Oil demand usually slows early in the year as refineries perform maintenance before the peak summer driving season in North America. Aramco had increased Asia Light pricing for five consecutive months up to January.
“We’re starting to roll into a period of lower demand,’’ said Robin Mills, chief executive officer of Dubai-based consultants Qamar Energy. “This comes after a particularly strong surge in use at the end of last year. Aramco’s reading the market and the monthly pricing is a guide that the market is a bit softer.’’
Saudi Arabia, de-facto leader of the Organization of Petroleum Exporting Countries, has been cutting output under a deal that OPEC and allied producers reached to try to clear a global crude glut. They agreed in November to extend their cuts until the end of this year, and Saudi Energy Minister Khalid Al-Falih said in January they may continue some form of cooperation in 2019. Aramco has been trimming supply even as prices that surpassed $70 a barrel last month spur an increase in rival output from U.S. shale deposits.
Growth in shale production should limit any increases in Saudi oil pricing, Kang Dongsoo, the head of corporate planning at Korean refiner SK Innovation Co., said on a Jan. 31 conference call. SK is a regular buyer of Aramco crude.
Middle Eastern producers compete with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.