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Thu 6 Jan 2011 10:52 AM

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Saudi Aramco cuts Feb oil prices to US, Europe

Saudi Oil Minister says OPEC members happy with current oil prices

Saudi Aramco cuts Feb oil prices to US, Europe
PRICES CUT: Saudi Aramco cut oil prices to US and Europe for Febuary while raising some Asia prices (Getty Images)

Saudi Aramco, the world’s largest state owned oil company, cut official prices for its crude for customers in the US, Europe and the Mediterranean next month and raised prices on some light grades to Asia.

The formula price for Arab Super Light crude, a grade sold only in Asia, rose the most, climbing $1.15 a barrel to $6.40 above the average of Oman and Dubai grades, the Gulf benchmarks used by traders in Asia, the company said in an email today.

Aramco set the price formula for its Light and Medium crudes for February loadings for US buyers 20 cents lower than last month, according to the statement. Light crude will sell at 5 cents a barrel over the Argus Sour Crude Index for US buyers and Medium will sell at a $2.10 discount.

Crude for February delivery rose 8 percent on the New York Mercantile Exchange in December to $91.38 a barrel. Saudi Oil Minister Ali al Naimi said November 1 that crude importing countries are happy with prices at $70 to $90 a barrel, broader than the $70 to $80 a barrel he said in March was “as close to perfect as possible.”

The largest Organization of Petroleum Exporting Countries member and the group’s defacto leader, Saudi Arabia has led output cuts announced in 2008 to support prices. OPEC decided at a meeting Ecuador last month to leave quotas unchanged. Most members are exceeding quotas to take advantage of prices that have jumped since the end of 2008.

Aramco raised the formula price for Extra Light crude to Asia by 40 cents a barrel to $3.50 above the Oman and Dubai average, according a list released today. Light Crude was unchanged at a $1.60 a barrel premium.

The biggest cut for the month was a $2 a barrel drop in the formula price for heavy crude to buyers in the Mediterranean region, to a $7.90 a barrel discount to Brent. The same grade for the US fell 30 cents to a $4.05 discount to the benchmark.

The kingdom pumped 8.25 million barrels of oil a day in December, 15,000 more than in November and 200,000 barrels a day above its OPEC quota, according to Bloomberg estimates.

Saudi Arabia was the third biggest exporter of crude to the US in the 10 months through October last year, data from the US Energy Information Administration show. Only Canada and Mexico sold more oil to the US, returning Saudi Arabia to the ranking it held among US suppliers from 2004 through 2007. Venezuela displaced it in 2009, dropping Saudi Arabia fourth place from second in 2008, the data show.

The kingdom has joint venture refinery projects in China and has sought to strengthen its role as a supplier to Asia as the global economic crisis reduced demand from the US and Europe. Aramco exported less crude to the US and Europe as a percentage of total shipments, its 2009 annual review shows.

Oil exports to Asia increased as China bought on average more than 1 million barrels of Saudi crude a day in 2009, Aramco said in the review released in June.

For US shipments, Aramco has priced its crude against the ASCI marker, an index of high sulfur oil from the Gulf of Mexico, since last year. The benchmark replaced a West Texas Intermediate crude price published by Platts, the energy information division of McGraw Hill at the start of 2010. WTI oil, a lighter, more expensive crude grade, also trades as a futures contract on the New York Mercantile Exchange.

The following table gives the differentials of the four regions in relation to benchmark prices, the month-on-month change and the degrees of gravity as defined by the American Petroleum Institute. Prices are in US dollars a barrel.

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