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Major OPEC Producers, Cued by Saudis, Raise Asia Crude Pricing

Anthony Di Paola
·3 min read

(Bloomberg) -- Three of OPEC’s biggest oil producers raised monthly pricing for shipments to Asia, their largest regional buyer, after markets tightened on Saudi Arabia’s plan to slash output.

Iraq, Abu Dhabi and Kuwait all raised pricing for February sales to Asia, taking their cue from the Saudis, who announced a similar increase last week. Iraq is the largest producer in the the Organization of Petroleum Exporting Countries after Saudi Arabia. The United Arab Emirates, in which Abu Dhabi holds most of the oil, and Kuwait rank third and fourth within the cartel, respectively.

Crude prices jumped after Saudi Arabia announced plans last week to cut production by 1 million barrels in February and March. The kingdom’s state-run producer Saudi Aramco followed that shock move by boosting prices for all February crude sales to Asia as well as the U.S. Global benchmark Brent crude has risen to more than $55 a barrel -- its highest since March -- and is up about 7% so far this year.

Analysts and traders will be watching for how Asian refiners react to price increases. The higher cost of Middle Eastern barrels could open up room for other crudes, including U.S. oil, according to Rustin Edwards, the head of fuel oil procurement at Antwerp-based shipping firm Euronav NV.

For refiners in Asia, heavy, high-sulfur grades from the Middle East “have been a fairly substantial part of their diet,” Edwards said. “Their appetite seems to be fairly stable at the moment, and as we get closer to the Chinese new year, we expect to see some continued buying interest from them as they stock up.”

The Chinese, or lunar, new year begins on Feb. 12.

Iraq increased its main Basrah Light grade by 70 cents a barrel for buyers in Asia, to a $1.10 premium over the regional benchmark, according to the country’s state oil marketer. It also raised prices for its Basrah Medium and Basrah Heavy grades to Asia. Kuwait, meanwhile, raised its export grade -- Kuwait Export Crude-- by 40 cents a barrel.

OPEC and its allies agreed last week to keep production unchanged for most members as their coalition works to restrain output amid slack demand and coronavirus shutdowns. While Russia and Kazakhstan will be able to pump slightly more, their increases will be outweighed by the cut in Saudi production.

In the UAE, government-owned Abu Dhabi National Oil Co. increased pricing for its main Murban crude by 25 cents a barrel, to a premium of 75 cents over the regional benchmark.

Abu Dhabi began setting forward pricing for its crude last March and will begin selling Murban on an exchange in the emirate in March of this year. Murban is lighter than most other Middle Eastern barrels and is comparable with Brent or with the lightest Saudi crude.

Iran, whose output and exports have plunged under the pressure of U.S. sanctions, and Qatar, which isn’t an OPEC member, also increased their pricing for sales to Asia next month.

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