State-owned oil giant Saudi Aramco has told Asian buyers that prices of Arab Light for April delivery will rise by $1.40 US per barrel, while prices for US buyers will go up by $1 per barrel; the price hikes are far larger than the previous price changes imposed by the Saudis of a few cents either way.
Saudi Arabia is the world’s largest exporter of crude oil, and the largest oil producer in the Organization of Petroleum Exporting Countries [OPEC], which in November sent the oil price plunging when it decided against cutting production from its ceiling of 30 million barrels a day as a way to preserve its market share amid falling oil prices.
This led the price of the industry benchmark Brent crude to continue its fall from a high of $110 a barrel in June 2014; the Saudis and the rest of OPEC made their decision to preserve market share due to increasing output from the US fracking industry. Brent fell to below $50 in January this year, a six-year low, before rallying to its current price of around $61 a barrel.
According to data from Marketwatch, Brent crude closed up on Tuesday at $61.78 after the news, up $1.11 from close on Monday. Last month Saudi Oil Minister Ali al-Naimi told the media that demand for crude was growing and that the “markets are calm now.”
al-Naimi was making his first public comments since the oil price began its rally, telling reporters at a conference in the port city of Jizan that “We don’t want anything that creates volatility in the market,” reported OilPro. “Why do you want to bring up the prices issue? Leave the prices alone.”
Last week Hercules Offshore announced that Saudi Aramco had canceled its contract with the company for its Hercules 261 drilling rig, in a move that was widely seen as a cost-cutting measure; the contract had been set to expire in late 2019. At the Davos World Economic Forum in January, Aramco CEO Khalid Al Falih said that “we’re cutting on a few things that we could cut, but we’re as committed as ever to our long-term strategy,” explaining that “like everyone else, we’re using the downturn as an opportunity to sharpen our fiscal discipline.”