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Petroleum industry

Saudi Aramco Raises Oil Prices for February Sales

Strategic Insights

— 1 min read

Western oil buyers have accepted Saudi Aramco's decision to increase prices for February sales, citing a firmer tone in European and U.S. Gulf Coast sour crude oil markets. The price hikes, ranging from 10 to 25 cents per barrel, reflect the strengthening of sour crude differentials against low-sulfur benchmark West Texas Intermediate (WTI). Saudi crude buyers point to the narrowing discount of West Texas Sour (WTS) to WTI as evidence of this firming, with WTS currently trading at a $1-per-barrel discount to WTI, down from $1.45 just a month ago.

Key Takeaways:

  • Saudi Aramco has increased price terms for February sales to the United States by 10-25 cents/bbl and to Europe by a flat 15 cents/bbl.
  • The price hikes reflect the recent strengthening of sour crude differentials against low-sulfur benchmark West Texas Intermediate (WTI).
  • The narrowing discount of West Texas Sour (WTS) to WTI is a key factor in the price increases, with WTS currently trading at a $1-per-barrel discount to WTI, down from $1.45 just a month ago.
  • Chevron Corp.'s 295,000 b/d Pascagoula, Miss., refinery's return to operation after hurricane damage has contributed to the firming of sour crude markets.
  • Aramco's price increases are seen as justified by Western oil buyers, who acknowledge the recent strengthening of sour crude markets.
  • The relatively small rise of 10 cents/bbl in the U.S. Arab Heavy formula is expected to bring it back into line with December differentials.
  • Buyers point out that Aramco may be cautious not to damage its position as top supplier to the United States through competitive pricing.

Statistics:

  • West Texas Sour (WTS) is currently trading at a $1-per-barrel discount to West Texas Intermediate (WTI).
  • The discount on WTS to WTI has narrowed from $1.45 just a month ago to $1 currently.
  • Chevron Corp.'s 295,000 b/d Pascagoula, Miss., refinery's return to operation has contributed to the firming of sour crude markets.
  • Aramco's price increases for February sales range from 10 to 25 cents/bbl for U.S. buyers and 15 cents/bbl for European buyers.
  • The cash value of the Dated Brent benchmark has eroded by 30 cents/bbl since Dec. 31.

Sources:

  • Toby Odone, Axel Busch, and Peg Mackey (not specified), "Saudi Aramco Raises Oil Prices for February Sales" (not specified).

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