Saudi Aramco plans first change in Asia crude oil price formula in decades

Saudi Aramco is changing the formula it uses to price its long-term crude oil sales to Asia, representing the first change to benchmarks for its official selling prices (OSP) since the mid-1980s. (Shutterstock)
Updated 04 July 2018
0

Saudi Aramco plans first change in Asia crude oil price formula in decades

  • Saudi Aramco’s long-standing price marker was the average of Platts Dubai and Platts Oman assessments
  • The company’s new Asia marker will replace Platts Oman with Dubai Mercantile Exchange (DME) Oman

LONDON: Saudi Aramco is changing the formula it uses to price its long-term crude oil sales to Asia in a move aimed at improving the overall reliability of its pricing.

It represents the first change to benchmarks for its official selling prices (OSP) since the mid-1980s, the company said on Wednesday.
Reuters earlier reported the planned changes from industry sources.

Saudi Aramco’s long-standing price marker was the average of Platts Dubai and Platts Oman assessments.

The company’s new Asia marker will replace Platts Oman with Dubai Mercantile Exchange (DME) Oman effective Oct. 1, 2018, effectively creating a hybrid between two major Asia benchmarks.

“We’re rebalancing our Asia marker to ensure that it is underpinned by a broad and vibrant marketplace,” said Ahmed Subaey, Saudi Aramco’s vice president of marketing, sales and supply planning.The inclusion of the DME Oman price complements the existing Platts Dubai price to provide our customers with better visibility into price dynamics.”

He said that the idea behind the change was to make sure the marker was market-reflective, well regulated and predictable.

Launched more than a decade ago, the DME Oman contract has become the most liquid physically deliverable futures contract for Middle East crude oil.

“It is obvious — look at the trading volumes of DME versus Platts for Oman,” Adi Imsirovic, a teaching fellow at the University of Surrey’s Energy Economics Center told Reuters.

Saudi Aramco’s decision could improve the liquidity for Oman futures trading on the DME and also for derivative instruments based off the Oman contract for hedging or price conversion purposes, a Singapore-based trader told the newswire.

“This is a good change as Platts Oman cannot be hedged,” he said.

Gulf oil exporters including Saudi Arabia and the UAE want to boost oil exports to Asia as they increasingly compete with US exports to the region.

Saudi authorities plan to list 5 percent of Aramco on the Tadawul exchange and an as-yet unspecified stock market with London and New York competing for the prize listing that has been touted as the world’s biggest IPO.

The oil giant has spare capacity of 2 million barrels per day (bpd) and can meet additional oil demand in case of any interruption in supplies, the company said this week.

The world’s third largest crude oil supplier currently produces about 10 million bpd and has the capacity to produce 12 million bpd, CEO Amin Nasser said.

OPEC and non-OPEC producers including Russia have agreed on small increases in oil production from July, after pressure from major consumers to curb rising costs.


Apple’s Cook to China: keep opening for sake of global economy

Updated 23 March 2019
0

Apple’s Cook to China: keep opening for sake of global economy

  • Cook’s comments come as Apple weathers sinking sales in China
  • Despite official pledges and repeated assurances that China would continue to open its markets

BEIJING: Apple chief executive Tim Cook nudged China on Saturday to open up and said the future would depend on global collaboration, as the United States and China remained locked in a bitter trade dispute.
“We encourage China to continue to open up, we see that as essential, not only for China to reach its full potential, but for the global economy to thrive,” Cook said at a China Development Forum in Beijing.
Despite official pledges and repeated assurances that China would continue to open its markets, some analysts worry that its reform project has slowed or even stalled under President Xi Jinping, who has sought greater control over the economy and a bigger role for state-owned firms at the expense of the private sector.
Cook’s comments come as Apple weathers sinking sales in China because of a contracting smartphone market, increasing pressure from Chinese rivals, and slowing upgrade cycles. The company reported a revenue drop of 26 percent in the greater China region during the quarter ending in December.
Before those results came out, in a January letter to investors, Cook blamed the company’s poor China performance on trade tension between the United States and China, suggesting that pressure on the economy was hurting sales in China.