Iranian situation impacts pricing system: Saudi Aramco crude premium may surge to $40, Asian buyers drive switch to alternatives like Brent as benchmarks

Mars Finance News reports that on March 30, due to the chaos in the regular pricing of Saudi crude oil caused by the Iran war, anxious Asian buyers are attempting to guide the country towards alternative supply pricing mechanisms as oil prices surge. Saudi Aramco is finalizing the costs of oil shipments for May, with price lists expected to be delivered to buyers in a few days. According to traders, the premium for its flagship product, Arab Light crude oil, based on regional benchmark regular pricing, is expected to skyrocket to an unprecedented level of about $40 per barrel, compared to a premium of only $2.50 in April. The monthly contract price set by Saudi Aramco is usually established as a price differential relative to the underlying benchmark, which consists of Dubai prices assessed by S&P Global Platts and Oman crude futures from the Gulf Commodity Exchange. Traders have stated that some Asian refiners have already requested Saudi Aramco to link its crude oil pricing to Brent futures, but other alternatives have also been proposed. These include using oil prices from the Shanghai Futures Exchange and then deducting transportation and other related costs, or even referencing other crudes like Upper Zakum from the UAE. Refiners’ traders who regularly import crude oil from Saudi Arabia indicated that negotiations between Saudi Aramco and clients are still ongoing, and no final pricing decision has been made yet. They added that if the premium level is set around $40 per barrel, it could lead to reduced procurement volumes. (Jinshi)