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

BlockBeats news, on March 30, due to the turmoil in the pricing of Saudi crude oil caused by the Iran war, anxious Asian buyers are trying to guide the country towards an alternative supply pricing mechanism as oil prices soar.

Saudi Aramco is finalizing the cost of oil shipments for May, with price lists expected to reach buyers within a few days. According to traders, based on regional benchmark pricing, the premium for its flagship product, Arab Light crude oil, is expected to soar to an unprecedented level of around $40 per barrel, while the premium for April was only $2.50.

Saudi Aramco’s monthly contract prices are typically set as a price differential against a base benchmark, which consists of the Dubai prices assessed by S&P Global Platts and Oman crude futures from the Gulf Commodity Exchange. Traders say that some Asian refiners have already requested Saudi Aramco to link its crude oil to Brent futures, but other alternative options have also been proposed.

These include using oil prices from the Shanghai Futures Exchange, then deducting transportation and other related costs, and even referencing other crudes such as 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. They added that if the premium level is set around $40 per barrel, it could lead to a reduction in procurement volumes. (Jin Shi)