Saudi Arabia, Which Allegedly Hiked Output, Just Raised Crude Export Prices To Asia And Europe

Tyler Durden's picture

Two weeks ago Zero Hedge claimed that Saudi Arabian "gestures" to hike crude output were about as hollow as the heads of those suggesting that dealing with surging oil prices involves reducing interest rates even more (which just happen to be at zero already), mostly as a result of the country's recent adoption of "whorism" or its doomed strategy to buy the love of its citizens. The reason is that as UBS' Andy Lees noted, Saudi "will need to ramp up production by about 10% (more capital spending) without prices falling" to fill the suddenly gaping budget hole left from literally throwing $37 billion out of Bernanke's leased helicopter. Yesterday, BusinessWeek's Peter Coy essentially reaffirmed our theory verbatim in the piece "Saudi Arabia Must Keep Pumping Oil to Buy Stability"... needless to say we completely agree with this. Obviously, the bigger issue here is that as WikiLeaks recently suggested, and was reconfirmed by Jim Rogers, Saudi Arabia is simply lying about its excess capacity. Because if Saudi had indeed raised output as many have hoped for, and as Saudi has represented, it would have made up for the funding differential simply by the hike in export volume. Instead, as Reuters reports, Saudi Aramco just hiked prices on oil to customers in Asia and Europe up substantially. This, at least to us, does not appear like the rational action of a player seeking to moderate surging oil prices to avoid further social conflict, and one who can plug offline capacity.

From Reuters:

Top oil exporter Saudi Arabia has raised the price of its flagship Arab Light crude oil in April to customers in Asia, State oil giant Saudi Aramco said on Saturday.

Aramco set the price at Oman/Dubai plus $1.95 a barrel, up 65 cents from March.

The price to the United States was reduced by 30 cents to parity with Argus Sour Crude Index and the price to northwest Europe was raised by 80 cents to BWAVE minus $3.40.

Saudi term crude supplies to the United States are priced as a differential to the Argus Sour Crude Index (ASCI).

Good thing Saudi reduced its export price to the US. Too bad Canada, which exports far more to the US than Saudi did not follow suit.

And more on the April changes in carious price schedules:

April March Change

Arab Extra Light +2.60 +2.70 -0.10

Arab Light 0.00 +0.30 -0.30

Arab Medium -2.20 -1.85 -0.35

Arab Heavy -3.90 -3.65 -0.25

Prices at Ras Tanura for Saudi oil destined for Northwest Europe are set against ICE Brent crude weighted average (BWAVE):

April March Change

Arab Extra Light -1.10 -1.75 +0.65

Arab Light -3.40 -4.20 +0.80

Arab Medium -5.90 -6.10 +0.20

Arab Heavy -8.45 -8.55 +0.10

Saudi term crude supplies to Asia are priced as a differential to the Oman/Dubai average:

April March Change

Arab Super Light +6.05 +5.80 +0.25

Arab Extra Light +3.95 +3.30 +0.65

Arab Light +1.95 +1.30 +0.65

Arab Medium -0.45 -1.10 +0.65

Arab Heavy -2.55 -3.05 +0.50

Prices at Ras Tanura for Saudi oil destined for the Mediterranean are set against the ICE Brent crude weighted average (BWAVE):

April March Change

Arab Extra light -1.60 -3.15 +1.55

Arab Light -3.75 -4.75 +1.00

Arab Medium -7.70 -7.30 -0.40

Arab Heavy -10.05 -9.70 -0.35

And to see how a cartel deals with supply demand imbalances, Bloomberg summarizes:

Aramco this week offered European refiners additional cargoes of Arab Light crude for loading this month, two officials involved in the negotiations said. The official prices for light grades to Northwest Europe and the Mediterranean Sea gained as oil prices rose and as lighter Libyan crudes were taken out of the market.

One can only hope, and the ruling oligarchy surely is, that the combination of increasing output and prices will be able to offset next week's planned demonstrations in Saudi. Look for many more billions to be thrown at Saudi's discontents over the next week as D-day approaches. And on, and on...