Major Opec producers raise Asia crude shipment prices

Hike in prices after Saudi Arabia’s decision to cut output by 1m barrels

Three of Opec’s biggest oil producers raised monthly pricing for shipments to Asia, their largest regional buyer, after markets tightened on Saudi Arabia’s plan to slash output.

Iraq, Abu Dhabi and Kuwait all raised pricing for February sales to Asia, taking their cue from the Saudis, who announced a similar increase last week.

Iraq is the largest producer in the Organisation of Petroleum Exporting Countries after Saudi Arabia. The UAE and Kuwait rank third and fourth within the cartel, respectively.

Crude prices jumped after Saudi Arabia announced plans last week to cut production by 1 million barrels in February and March.

The kingdom’s state- run producer Saudi Aramco followed that shock move by boosting prices for all February crude sales to Asia as well as the US Global benchmark Brent crude has risen to more than $ 55 a barrel — its highest since March — and is up about 7 per cent so far this year.

Analysts and traders will be watching for how Asian refiners react to price increases. The higher cost of Middle Eastern barrels could open up room for other crudes, including US oil, according to Rustin Edwards, the head of fuel oil procurement at Antwerp- based shipping firmEuronav NV.

For refiners in Asia, heavy, high- sulfur grades from the Middle East “have been a fairly substantial part of their diet,” Edwards said. “Their appetite seems to be fairly stable at the moment, and as we get closer to the Chinese new year, we expect to see some continued buying interest from them as they stock up.”

The Chinese, or lunar, new year begins on February 12.

Iraq increased its main Basrah Light grade by 70 cents a barrel for buyers in Asia, to a $ 1.10 premium over the regional benchmark, according to the country’s state oil marketer. It also raised prices for its Basrah Medium and Basrah Heavy grades to Asia. Kuwait, meanwhile, raised its export grade — Kuwait Export Crude — by 40 cents a barrel.

Opec and its allies agreed last week to keep production unchanged for most members as their coalitionworks to restrain output amid slack demand and coronavirus shutdowns. While Russia and Kazakhstan will be able to pump slightly more, their increases will be outweighed by the cut in Saudi production.

Iran, whose output and exports have plunged under the pressure of US sanctions, and Qatar, which isn’t an Opec member, also increased their pricing for sales to Asia next month.