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(Bloomberg) — Asian oil refiners have asked Saudi Arabia to change the way it prices the crude they take after the Middle East war disrupted the traditional system, according to traders.
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The biggest buyers of Saudi oil want the crude to be priced against Brent futures on the Intercontinental Exchange instead of a combination of the Dubai and Oman benchmarks, said the traders, who are directly involved in the discussions. They asked not to be named due to the sensitivity of the matter. Talks with Saudi Aramco are ongoing and may fail, the traders said.
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Aramco didn’t respond to a request for comment.
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The Saudi crude is priced against a benchmark that’s a combination of Oman futures on the Dubai-based Gulf Mercantile Exchange, as well as the Dubai oil price as assessed by a unit of S&P Global Energy, known as Platts. Aramco’s official selling prices are set as a differential to that baseline each month. It’s the baseline that traders are asking Aramco to swap out with the ICE Brent futures benchmark, they said.
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Both the Oman and Dubai prices have skyrocketed since the start of the war, outpacing gains in global benchmarks like Brent and West Texas Intermediate, as the effective closure of the Strait of Hormuz cut access to most Persian Gulf oil. A decision by Platts to exclude grades that load inside the Gulf from its market on close platform, has further distorted prices, the traders said.
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Platts didn’t respond to an email seeking comment.
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Physical crude transactions are priced on a variety of benchmarks, with each region tending to prefer the use of different markers. Asian refiners typically use the Dubai or Dated Brent benchmark — both products of Platts. Some Chinese refiners prefer to price their crude off of ICE Brent.
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—With assistance from Rong Wei Neo and Anthony Di Paola.
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