Saudis Set Record Premium for Asian Oil Deliveries Amid Market Disruption from War

Saudi Arabia Raises Oil Price to Record High Amid Middle East Conflict

Saudi Arabia's state oil producer, Saudi Aramco, has raised the price of its main oil grade, Arab Light crude, to a record high premium for sales next month to refiners in Asia. According to a price list seen by Bloomberg, the premium has been set at $19.50 over regional benchmarks.

This move comes as the widening conflict in the Middle East and Iran's near-closure of the Strait of Hormuz convulse energy markets. The Strait of Hormuz, a vital waterway for oil shipments, remains largely shut, blocking the usual route for millions of barrels of crude from Saudi Arabia and other major Persian Gulf producers. As a result, Riyadh has shifted most of its shipments to the Red Sea port of Yanbu, which is about 1,200 kilometers from its usual loading port of Ras Tanura.

Saudi Aramco's official list has stuck with the usual practice for pricing oil for loading at Ras Tanura, adding complexity to what buyers would pay for lifting crude. The company has asked customers to submit separate requests for how much oil they'd like to receive from either port and said it would only supply the Arab Light grade from Yanbu.

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The war and the closure of Hormuz have driven Brent crude up by more than 50%. Aramco has raised prices of the Arab Light grade by $17 a barrel for May, the biggest jump on record. Additionally, the company has increased pricing on all of its other crude grades to Asia by the same amount, even if those won't be offered with Hormuz closed. Supplies to other regions, such as the US and Northwest Europe, were also raised to a record premium.

Saudi Arabia and the United Arab Emirates are the only two Gulf producers with significant export alternatives that circumvent Hormuz. Aramco has reached the maximum capacity of 7 million barrels a day on its pipeline running to the Red Sea coast, from where it is exporting close to 5 million barrels a day of crude, or about 70% of its prewar total shipments.

Aramco has shut most production of its Medium and Heavy crude grades and is instead focusing on selling its Light and Extra Light barrels from Yanbu. The company's Chief Executive Officer, Amin Nasser, announced this decision on a conference call on March 10.

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