Saudi oil giant ups crude prices for Asian buyers amid tightening supply

The world's top oil exporter Saudi Aramco announced its first crude oil price hike in three months

The world’s top oil exporter, Saudi Aramco on Monday announced a price increase for its crude exports to Asia for February 2025, signalling expectations of tighter supply in its largest market, according to a report by Reuters. This comes after the Organisation of the Petroleum Exporting Countries (Opec+) extended production cuts and amid decreasing supplies from Russia and Iran.

 

Saudi Aramco raised the premium for its flagship Arab Light crude by 60 cents to $1.50 a barrel over the regional benchmark, exceeding market expectations of a 10-cent increase. This marks the first price hike in three months, following two consecutive months of price cuts due to weak refining margins.

 

 

Prices for other crude grades sold to Asia were also increased by 40 to 60 cents per barrel. Meanwhile, prices were raised for all grades to the Mediterranean and northwestern Europe, but reduced for the US market.

 

Oil disruptions from Russia

The price increase reflects a recovery in spot premiums for February-loading West Asia grades, driven by concerns over supply disruptions from Russia and Iran. US sanctions have tightened logistics for Iranian crude, pushing up costs and boosting prices, especially in China. Indian state refiners are also turning to crude from West Asia to offset reduced availability of cheaper Russian oil.

 

Opec+ production cuts

Opec+, which controls about half of the world’s oil supply, decided in December to delay planned output increases until April 2025 and extended production cuts through the end of 2026. This decision aims to manage supply amid weak demand and rising production from non-Opec+ countries.

 

India to lead crude oil demand

Despite global crude oil prices hovering around $75 a barrel due to sluggish demand growth, particularly in China, demand in India is expected to rise significantly. The US Energy Information Agency (EIA) forecasts Indian oil demand to grow by 330,000 barrels per day (bpd) in 2025, accounting for 25 per cent of global demand growth.

 

The International Energy Agency highlighted slower demand growth in China but noted that emerging Asia, including India, will continue to drive global oil demand. Opec’s long-term outlook projects a combined demand increase of 22 million bpd from India, Asia (excluding China), Africa, and West Asia by 2050, with India alone contributing eight million bpd.