Oil markets might be looking up, if Saudi’s official oil selling price actions are any indication—and they usually are.
Saudi Arabia has raised the official selling price of its Arab Light crude oil sold to Asia for the month of November, according to Bloomberg.
Saudi Arabia’s price hike of its flagship crude grade to its most prolific market is a sign that the market might be looking up—or at least that Aramco thinks it is looking up, as Asia refining markets increased over the last week of September.
Asian refineries’ profit markets for jet fuel, in particular, have reached their highest levels in months, according to Reuters, as demand picks up in the runup to the winter months. Margins are still depressed, however, compared to usual margins, with Asian jet fuel demand expected to be 700,000 bpd lower in the fourth quarter than this time last year
It is this winter heating season in Asia that is expected to bolster, albeit temporarily, demand for refined products and, ultimately crude oil.
Traders have long followed the world’s largest oil exporter’s pricing actions to Asia for indications of what’s to come. Other Middle Eastern crude exporters also typically follow Aramco’s lead.
Aramco is lowering November prices for crude headed to the Mediterranean region, suggesting a softening might be on the horizon there. It’s price to the United States will be held steady.
Aramco cut its OSP for Asia for the months of September and October, but renewed bullishness in the markets have changed minds in Riyadh.
By Julianne Geiger for Oilprice.com
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Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London