Saudi Aramco Widens Heavy Crude Oil Discount for Asia to Record

Saudi Aramco Widens Heavy Crude Oil Discount for Asia to Record

By Nesa Subrahmaniyan

May 5 (Bloomberg) -- Saudi Aramco, the world's largest state oil company, increased the discount on prices of heavy crudes it will export to Asia in June to a record after the refining profit for fuel oil declined.

Dhahran, Saudi Arabia-based Aramco widened discounts for its Arab Heavy grade by 45 cents to minus $7.45 a barrel and Arab Medium was reduced by 20 cents to minus $7.45 a barrel, the company said in a faxed statement. Both crudes after processing yield more fuel oil, used in power plants and ships.

The refining profit for fuel oil has declined in the past month because of rising supplies in Singapore, Asia's biggest oil-trading center. Fuel oil's price spread, or crack, to Dubai crude, an Asian benchmark, fell to $22 a barrel on April 21 and was at $19.12 a barrel on May 2, according to Bloomberg data.

``Demand for fuel oil has remained feeble,'' Vienna-based JBC Energy Research GmbH said in its weekly report today. ``More supplies from South Korea are pressuring the crack.''

The premium for Arab Light, the most common variety exported by Saudi Arabia, to Aramco's Asian benchmark was raised to a seven-month high for June, widening to $1.85 a barrel from $1.45 a barrel in May, Aramco said.

For Asian customers, Aramco increased the premium for Extra Light by 60 cents to $5.85 a barrel, while Arab Super Light was raised by 75 cents to $7.80 a barrel. The light grades yield more diesel and kerosene after processing.

Diesel and kerosene prices in Asia have climbed to records in the past month because of rising demand from China, India and Indonesia as refiners shut for routine maintenance of plants. As consumption rose, refining margins, or profits, also gained prompting higher demand for crude grades that yield more diesel and kerosene, or middle-distillates.

Asian prices are quoted in relation to the average of Oman and Dubai grades, the two Arabian Gulf benchmarks used by Asian oil refiners and traders. Aramco started linking its prices to the average of Oman and Dubai crudes in 1986.