Aramco ups crude prices as recovery signs grow

The price of Brent crude, the global benchmark, jumped back above $30 after the prices were announced, up 6 percent to $31.64 in Gulf afternoon trading. (Reuters)
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Updated 08 May 2020

Aramco ups crude prices as recovery signs grow

  • Market analysts took the OSP rates as further positive news after a week when some have declared the worst to be over after a turbulent month for global energy markets

Saudi Aramco signaled renewed confidence in the recovery of demand for oil by raising its prices for June supply of crude from the low levels of the past two months.

The company announced its official selling prices (OSP), showing increases over May across virtually every grade of crude. Only little-traded “super light” was cut further in a range of price increases that went from $1 per barrel for crude destined for American markets to rises upwards of $6 a barrel for crude bound for European and Mediterranean trading zones.

In the the critical Far Eastern market — the “battle ground” among oil producers — prices were increased from between $0.9 to $1.7 per barrel over May for different grades of Aramco crude.

The OSPs — the actual price at which Aramco is willing to sell oil — are eagerly watched by traders as an indicator of sentiment at the world’s biggest oil company.

The oil price war of April was kicked off when Aramco offered big discounts to customers in early March just as global demand for crude fell off a cliff on the effects of the worldwide lockdowns that hit economic activity.

The price of Brent crude, the global benchmark, jumped back above $30 after the prices were announced, up 6 percent to $31.64 in Gulf afternoon trading.

For Asia, which consumes most Aramco crude, the OSPs are calculated against Middle East crude benchmarks DME Oman and Dubai. DME Oman rallied to around $32 per barrel after the Aramco prices were announced.

Paul Young, head of energy products at Dubai Mercantile Exchange, told Arab News: “These OSPs are for June-loading crude, so with the record OPEC+ cuts and demand returning, fundamentals should look much more balanced by the time this oil hits the market as refined products in the third quarter.”

Market analysts took the OSP rates as further positive news after a week when some have declared the worst to be over after a turbulent month for global energy markets. Oil analyst Arjun Murti tweeted: “With demand showing early recovery signs, Saudi is helping to further boost recovery.”

Some took the relatively high prices on offer to European markets as a concession to Russia, which became Saudi Arabia’s partner in the historic OPEC+ cuts a couple of weeks ago after a big falling out at the beginning of March.


European bank ramps up stimulus package

Updated 05 June 2020

European bank ramps up stimulus package

FRANKFURT: The European Central Bank approved a bigger-than-expected expansion of its stimulus package on Thursday to prop up an economy plunged by the coronavirus pandemic into its worst recession since World War II.

Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by €600 billion ($674 billion) to €1.35 trillion and that purchases would run at least until end-June 2021, six months longer than first planned.

It also said it would reinvest proceeds from maturing bonds in its pandemic emergency purchase scheme at least until the end of 2022.

ECB President Christine Lagarde scotched speculation that the bank could follow the US Federal Reserve in buying sub-investment grade bonds, saying that option was not discussed by policymakers.

The announcement, which comes just weeks after Germany’s Constitutional Court ruled that the ECB had already been exceeding its mandate with a longstanding asset purchase program, prompted a rally in the euro and bond markets.

“Today’s easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the euro area survive the corona crisis in one piece. The ECB will do its part, and it hopes the governments will do their part,” Nordea analysts said in a note.

The bank dramatically revised downward its baseline scenario for euro zone output this year to a contraction of 8.7 percent from the modest 0.8 percent rise it had forecast only in March.

“The euro area economy is experiencing an unprecedented contraction. There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it,” Lagarde said.

She said she was confident that a “good solution” could be found on the legal stand-off with Germany’s top court.