The Middle East conflict has caused chaos in Saudi crude oil pricing, with May premiums potentially soaring to $40 per barrel.

Gate News message, March 30, affected by the Iran war, Saudi Arabia’s regular crude oil pricing mechanism has fallen into chaos, and anxious Asian buyers are trying to push Saudi Arabia to shift to alternative supply pricing mechanisms. According to traders, Saudi Aramco is locking in the cost for May-loading oil, and the price sheet is expected to be delivered to buyers within a few days. Under the customary regional benchmark-based pricing, the premium for its flagship Arab Light crude oil is expected to surge to an unprecedented level of about $40 per barrel, while the premium for April was only $2.50. Saudi Aramco’s monthly contract prices are usually set as a differential relative to a benchmark base price, which consists of the Dubai crude price (a Middle East benchmark) assessed by S&P Global Platts and Oman crude oil futures from the Gulf Commodity Exchange. Some Asian refiners have asked Saudi Aramco to link its crude with Brent crude oil futures (the international oil price benchmark). Other alternatives include using prices from the Shanghai International Energy Exchange (the China crude oil futures market) (minus costs such as transportation), or referring to other crude oils such as Upper Zakum in the UAE. Traders said negotiations between Saudi Aramco and its customers are still ongoing, and no final pricing decision has been made. They added that if the premium level is set around $40 per barrel, it could lead to reduced procurement volumes.