Saudi Arabia Hikes Key Oil Prices Further As Market Tightens

Crude oil storage tanks at an oil refinery and terminal in Ras Tanura, Saudi Arabia.

(Bloomberg) -- Saudi Arabia hiked the price of its flagship crude to its main buyers in Asia for next month after OPEC+ agreed to keep current supply cuts in place and as the Middle Eastern oil market shows signs of strengthening.

State-owned Saudi Aramco raised the official selling price of Arab Light crude for Asia to a premium of $2 a barrel to the regional benchmark for May sales, according to a price list seen by Bloomberg.

The monthly gain of 30 cents was more than a survey of traders expected and is the second consecutive increase for the grade to the region.

Middle Eastern crude markets are looking increasingly tight, with key gauges rallying since the start of the month. A panel of the Organization of Petroleum Exporting Countries and its partners this week also recommended keeping the group's current output-cut policy in place through June. In addition, geopolitical risk linked to war and attacks on shipping have contributed to crude futures rising to the highest prices this year, above $91 a barrel.

The supply cuts are helping to squeeze the market for relatively dense and sulfurous crude, which makes up a majority of grades pumped from the Persian Gulf. The United Arab Emirates is also using more volumes of its Upper Zakum grade — a competitor to Saudi Arab Light — for its Ruwais refinery, and the decline in exports has taken Asian oil traders by surprise.

The kingdom increased prices for its heaviest grades by more than those for its lighter ones. An increase of 50 cents in its Arab Heavy price to Asia was the largest since September. Most barrels to northwest Europe and the US were unchanged.

--With assistance from Alex Longley.

(Updates with additional prices in last paragraph.)

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