Reuters is reporting the Asian oil premium is falling from $1 – $1.50 to below $1, and even going into reverse, as the big oil consumers there continue to grow, and increasingly source supplies from non-Opec countries:
Rarely officially discussed or acknowledged, the Asian oil premium has dwindled to an average of less than $1 per barrel over the past two years.
The premium is determined in large part by the official selling prices (OSPs) set by Saudi Arabia, Iran, Iraq, and Kuwait, which supply about 15 percent of the world’s crude among them. They set differential prices against benchmarks on a monthly basis, adjusting them to account for regional variations.
From an average of between $1.00 and $1.50 earlier this decade, the premium has dropped to below $1.00 over the past two years.
Reuters data calculate the daily price of Arab Light crude heading to Asia some 84 cents a barrel above the price of the same grade heading to the U.S. Gulf., and some 22 cents more expensive than crude heading to Europe over the past two years.
The story attributes it to growing demand, growing Gulf investment in refinery capacity, and Asian countries sourcing oil from non-Opec producers such as Kazakhstan, Brazil and Sudan.