Saudi Arabia raises Asian oil premiums

Saudi Arabia raised the premiums it charges over benchmark prices in Asia for two of its most popular varieties of crude oil to the highest in at least seven years, crimping refiners' earnings.

Arab Light for October was increased by 60 cents to $1.35 a barrel above the regional benchmark, Dhahran-based Saudi Aramco, the world's largest state oil company, said in a faxed statement today. Arab Extra Light was raised 75 cents to $4.25. For US customers, Arab Light, Arab Medium and Arab Heavy grades were cut by between 5 cents and 90 cents.

Higher prices for Saudi oil may prompt Asian refiners, including Nippon Oil Corp, to seek alternative grades such as Oman, Abu Dhabi's Murban, Russia's Sokol and Qatar Marine. Lighter varieties rich in kerosene, used for heating in Japan, are in demand before the Northern Hemisphere winter season from November through February.

"The Japanese and Koreans will perhaps rush for Russia's Sokol oil to supplement their kerosene-rich oil supply as the winter season is just around the corner,'' said Akira Kamiyama, derivative trader at Mitsui & Co's petroleum department.

Prices to the US are set against the West Texas Intermediate benchmark. US refiners would have to pay minus $5.10 a barrel for Arab Light, minus $7.65 a barrel for Arab Medium and minus $10 a barrel for Arab Heavy in October. The oil producer kept the discount of its Extra Light grade unchanged to the US at minus $2.65 a barrel.

For Asian customers, Aramco raised Arab Super Light by 50 cents to a premium of $6.45 a barrel. It narrowed the discounts for Arab Medium by 30 cents to minus $1.05 a barrel and by 25 cents to minus $3.35 a barrel for its Arab Heavy grade. 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.