Saudi oil price hikes squeeze Asian refineries amid rising geopolitical risks

Saudi Arabia has raised its crude prices higher than anticipated, reflecting increased risks from potential Iranian supply disruptions.

State-owned Saudi Aramco boosted the official selling price of its Arab Light crude to Asia by 90 cents per barrel for November, surpassing the 65-cent increase forecasted in a Bloomberg survey.

Refineries noted that this price hike has made Saudi crude more expensive compared to other sour grades from the Middle East in the spot market.

Despite this, the looming threat to Iran’s oil exports is expected keep China’s demand for Saudi crude strong, according to the survey.

Aramco raises oil price premium to Asia amid rising market volatility

Saudi Arabia has increased the premium on its oil sales to its key Asian market, as crude traders track escalating conflict in the Middle East, driving volatility in the oil market.

Asian refineries have grown increasingly anxious as tensions between Israel and Iranian-backed groups intensify. The bulk of these refineries rely heavily on oil exports from Gulf producers, with exports reaching 1.7 million barrels per day.

Profits fall below seasonal averages

According to Bloomberg, any disruption to Iranian oil supplies could significantly impact China’s private refineries, often referred to as "teapots," which have maintained competitiveness thanks to heavily discounted Iranian oil imports.

In addition to the rise in Saudi crude’s official selling price, refineries have flagged increasing shipping costs and the broader surge in global benchmark prices as additional pressures inflating feedstock costs, further eroding profits.

In Singapore, Asia’s oil pricing hub, refining margins for complex refineries dropped to near break-even levels last week, while profits have consistently fallen below seasonal averages for weeks.

Daily rates for hiring very large crude carriers (VLCCs) soared by more than 30% last week amid concerns that Israel might target Iranian ships near their main export terminal.

Meanwhile, global Brent crude prices have surged nearly 10% this month as geopolitical tensions heighten, prompting traders to extend bullish positions on crude in anticipation of further price increases.