Saudi Arabia, the world’s largest crude exporter, raised pricing for all May sales to Asia. Country’s oil minister said that global demand is improving.
- State-owned Saudi ArabianOilCo. narrowed the discount for its Arab Light grade to Asia by $0.30/barrel setting the crude at a discount of $0.60/barrel to the regional benchmark.
Does it indicate demand is coming back?
Probably not.
- The producer cut pricing for May sales of Light crude to the U.S. by $0.10/barrel and to Northwest Europe by $0.20/barrel, according to the statement. This sure is not a positive indication for global demand. Europe stands one of the largest crude consuming region in world.
Can it then be said demand is improving in Asia?
- Consumption demand might not be improving as a whole. Part of the demand is coming from countries and companies building up coffers amid weaker price. China is reported to be building up strategic reserve worth 90 days of supply.
- Refineries are the driver of demand. Indian sub-continent is set to become world’s largest crude oil refining region.
Is there supply crunch then?
Supply still remains at large.
- Refineries across regions are choosing between producers.
- South Korea taking deliveries of oil from Mexico, first time in years.
- Iranian tankers stand ready offshore ready to be delivered.
- Eassar oil reported to be taking deliveries from Latin America.
Why raise price then?
- If noted carefully, Saudis’ have been raising price of light crude that is in high demand across refineries. To note Saudi Arabia has also been reducing its export of heavy crude, which now is being used in domestic market.
The material has been provided by InstaForex Company – www.instaforex.com