Saudi Arabia's state-controlled Saudi Aramco has slashed the official formula prices for all of its October-loading crude exports headed to Asia-Pacific to its lowest level in four months, as demand remains weak with expectations of a regional resurgence of Covid-19.
The company cut the October formula prices for Asia-bound shipments of its flagship Arab Light crude by $1.40/bl from the previous month, setting it at a 50¢/bl discount to the monthly average of Oman-Dubai assessments. It also lowered the October Asia prices of its light sour Arab Extra Light and Arab Super Light crude exports by $1.50/bl each, setting the grades at an 80¢/bl discount and a 55¢/bl premium to the Oman-Dubai benchmarks respectively.
Aramco made smaller reductions to its heavier crudes sold to customers in Asia-Pacific, moving the Arab Medium and Arab Heavy October formula prices down by $1.20/bl and 90¢/bl respectively, setting both grades at a 30¢/bl discount to Oman-Dubai each. This put the Arab Medium and Arab Heavy formula prices above that of Arab Light, which was only the second time on record that the heavier grades were priced at a premium to Arab Light, according to Argus data.
The price cuts were largely within market expectations, with Asia-Pacific buyers generally anticipating Aramco to reduce prices by around 60¢-$1.20/bl as demand in the region had softened on weakening refining margins with expectations of a second wave of Covid-19 infections. The intermonth structure of Mideast Gulf benchmark medium sour Dubai crude, a factor that Saudi Arabia considers when setting its crude formula prices to Asia, had moved deeper into contango in August, with the discount of front-month to third-month Dubai prices widening by about $1.32/bl on the month.
Traders had also expected Aramco to reduce the October Asia prices of its heavier crude grades by a smaller amount compared with its lighter grades, given the firmer margins for high-sulphur fuel oil and weaker distillates' market.
For its customers in the Mediterranean, Aramco cut the October formula prices for Arab Extra Light, Arab Light and Arab Medium by 20-60¢/bl on a fob Ras Tanura basis and by 25-65¢/bl on a fob Sidi Kerir basis respectively. But the company raised the October formula prices for Arab Heavy sold to the Mediterranean by 30¢/bl and 25¢/bl on a respective fob Ras Tanura and fob Sidi Kerir basis.
Aramco lowered the October formula price for shipments of Arab Extra Light and Arab Light destined to northwest Europe by 60¢/bl and 20¢/bl respectively, while keeping the October formula price of Arab Medium unchanged. It lifted the Arab Heavy October formula price for European customers by 30¢/bl.
Aramco also reduced the October formula prices of all its crude exports for US customers by 50-70¢/bl against the previous month.
| Saudi Aramco crude official formula prices ($/bl) | |||
| October | September | ± | |
| US (vs ASCI) | |||
| Extra Light | 1.50 | 2.20 | -0.70 |
| Arab Light | 1.05 | 1.65 | -0.60 |
| Arab Medium | 0.35 | 0.85 | -0.50 |
| Arab Heavy | 0.00 | 0.50 | -0.50 |
| Northwest Europe (vs marker crude Ice Brent) | |||
| Extra Light | -1.90 | -1.30 | -0.60 |
| Arab Light | -2.00 | -1.80 | -0.20 |
| Arab Medium | -1.90 | -1.90 | 0.00 |
| Arab Heavy | -2.00 | -2.30 | 0.30 |
| Asia-Pacific (vs Oman/Dubai) | |||
| Super Light | 0.55 | 2.05 | -1.50 |
| Extra Light | -0.80 | 0.70 | -1.50 |
| Arab Light | -0.50 | 0.90 | -1.40 |
| Arab Medium | -0.30 | 0.90 | -1.20 |
| Arab Heavy | -0.30 | 0.60 | -0.90 |
| Mediterranean fob Ras Tanura (vs marker crude Ice Brent) | |||
| Extra Light | -1.20 | -0.60 | -0.60 |
| Arab Light | -1.60 | -1.20 | -0.40 |
| Arab Medium | -1.60 | -1.40 | -0.20 |
| Arab Heavy | -1.80 | -2.10 | 0.30 |
| Mediterranean fob Sidi Kerir (vs marker crude Ice Brent) | |||
| Extra Light | -0.60 | 0.05 | -0.65 |
| Arab Light | -1.00 | -0.55 | -0.45 |
| Arab Medium | -1.00 | -0.75 | -0.25 |
| Arab Heavy | -1.20 | -1.45 | 0.25 |
| Source: Aramco | |||
