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Oil flows from Saudi Arabia at $ 25 per barrel

US, WASHINGTON (NEWS OBSERVATORY) — European refineries have asked for more Saudi oil than usual. Saudi Arabia offers its barrels of oil at a huge discount

Saudi Arabia is driving a wave of crude oil toward Europe, the traditional market for selling Russian oil, and now Riyadh promises to supply the regional refineries with three times as much oil as usual.

Saudi shipments, accompanied by unprecedented discounts, are turning the European oil market into an increasingly fierce battle in the area of ​​oil prices between Riyadh and Moscow. Saudi Arabia offers its flagship product, Arab Light, with delivery to Rotterdam at a price of about $ 25 per barrel, which is a huge discount compared to Russian crude Urals.

All European refineries, including Royal Dutch Shell Plc, BP Plc, Total SA, OMV AG, Repsol SA and Cepsa SA, received significantly more crude oil from state-owned Saudi Aramco than usual. This was reported by people who are familiar with such operations. The volume of additional deliveries ranged from 25% to 200% depending on the company, the same sources said.

Reduced Price Crude Oil

Saudi Arabia sharply reduced oil prices to increase supplies. The discounts offered by the Saudis are so great that Arab Light will literally squeeze Urals and other grades of crude oil “out of the regional diet of refineries,” if the price doesn’t drop too, said Amrita Sen, chief analyst at Energy Aspects Ltd, a consulting firm . in a message to customers.

The increase in supply was confirmed by Aramco, and information was sent to European oil companies on Wednesday, the same sources said, asking not to be named, as private information is being discussed. One European refinery received twice as much oil as usual, a source familiar with the issue said.

All companies either declined to comment or did not respond immediately.

Urals brand oil under attack

Saudi Aramco announced Tuesday that it has been increasing production to 12.3 million barrels of oil per day since April. This happened just a few days after a proposal was sent to refineries for the purchase of more oil at record discounts compared to the regular selling price.

That is, we are talking about a discount or a premium with which the Saudis sell their oil, compared to regional base prices.

A sharp increase in supply – 25% more than last month – forced Aramco to exceed its maximum capabilities, and this indicates that Saudi Arabia has opened strategic reserves to bring as much crude oil to the market and do it as quickly as possible .

Aramco did not disclose data on the regional division of additional production, however, judging by the volumes reported to European oil refineries, this region is the main goal of increased Saudi exports.

Typically, Aramco sends a small portion of its crude oil to the European continent, with Asia accounting for the bulk of its sales. In 2018, Aramco delivered only 10% of its crude oil to Europe. According to the US Energy Information Administration, this is the latest complete and accessible information.

In addition to delivering crude oil directly from Saudi Arabia, Riyadh can also provide European consumers with its strategic reserves, and very quickly. Aramco stores its crude oil in Rotterdam, on the threshold of the largest oil refining centers in northeastern Europe, as well as in the Egyptian port of Sidi-Kerir in the Mediterranean Sea, that is, just a few days sailing from the largest oil refineries in southern Europe.

Aramco’s official price cut at the end of last week was the largest in more than three decades. The fall of 8% in prices for the main varieties is a direct challenge for Russia, which in the same region sells significant volumes of oil to its flagship brand Urals. Aramco will sell Arab Light crude oil in Europe at an unprecedented discount of $ 10.25 relative to the value of Brent crude oil.

Discounts on Russian crude oil immediately increased. On Monday, Vitol Group and Trafigura Group could not find buyers when they offered Urals crude oil at the highest discount relative to the regional base price for almost two months.

“The last Saudi official sales price was set more likely with a hint of a political rather than a technical strategy,” said one of the experts at the Vienna-based consulting company JBC Energy GmbH.


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