Saudi Oil Pricing Chaos: May Premium May Jump to $40 Due to War

Saudi Crude Pricing in Turmoil as Asian Buyers Push for Alternatives

The war in Iran is upending Saudi Arabia's usual oil pricing playbook. Anxious Asian buyers are now pushing for alternative pricing mechanisms.

Saudi Aramco is finalizing costs for May-loading crude, with price lists expected to land in buyers' hands within days, according to traders. Under the traditional regional benchmark system, premiums for its flagship Arab Light crude are expected to skyrocket to an unprecedented $40 per barrel. That's a massive jump from just $2.50 in April.

Saudi Aramco typically sets monthly contract prices as a differential to a baseline benchmark made up of S&P Global's Platts Dubai assessment and DME Oman futures. Some Asian refiners are now asking Aramco to switch to Brent futures instead. Other alternatives being floated include Shanghai crude futures—minus shipping costs—or referencing other grades like UAE's Upper Zakum.

Negotiations are still ongoing, traders said. No final decision has been made. And if the premium lands around $40, they added, buyers could pull back on volumes.