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Aramco reduces oil differentials for Europe refiners

08.08.2014  | 

The reductions by Saudi Aramco reflect the anticipated reopening of the Ras Lanuf and Es Sider terminals in Libya, which could increase that country's crude oil exports by 500,000 bpd. They also reflect the intention for Saudi oil to remain competitive in southern European markets.

Keywords:

While differentials to the US have not changed from July to August, Saudi Aramco has reduced its differentials for other destinations, especially Europe, the US Energy Information Administration (EIA) said on Friday.

Aramco sells its oil to long-term customers at an official selling price (OSP). Saudi Aramco adjusts the OSP monthly based on specific conditions in different regions of the world, the EIA explained.

For example, refiners in the US that import Arab Light crude oil this month will expect to pay the Argus Sour Crude Index (ASCI) price plus a differential of +$3.65/bbl.

But European refiners could be getting better discounts, the EIA reported in its "Today in Energy" brief.

"According to Arab Oil & Gas, these reductions reflect the anticipated reopening of the Ras Lanuf and Es Sider terminals in Libya, which could increase that country's crude oil exports by 500,000 bpd," the EIA wrote. "They also reflect the intention for Saudi oil to remain competitive in southern European markets."

Saudi Aramco's OSP is calculated on a differential to a crude benchmark based on destination and crude quality, taking into account product yields and local market conditions. Each month, Aramco publishes these differentials, which determine the OSP for the following month.

  • Asia. For crude oil exported to Asia, the OSP is a differential to the average of Dubai and Oman crude prices published by the pricing agency Platts.
  • Europe. Crude oil exported to Europe and the Mediterranean has an OSP based on the Brent Weighted Average (BWAVE) published by IntercontinentalExchange.
  • United States. Crude oil exported to the United States has an OSP based on the Argus Sour Crude Index (ASCI), which is a price index based on crude oil produced from oil fields (Mars, Southern Green Canyon, and Poseidon) in the US Gulf Coast.
Saudi Arabia is the world's second-largest producer, trailing only the US.

graph of Saudia Aramco OSP differential for sale of Arab Light Crude by destination, as explained in the article text



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