The Middle East conflict is disrupting oil price benchmarks, and Saudi Aramco's premium could surge to $40 per barrel.

As the war with Iran throws Saudi Arabia's conventional pricing for crude oil into disarray, anxious Asian buyers are attempting to steer the country toward alternative supply pricing mechanisms as oil prices soar. Saudi Aramco is finalizing the cost of oil for May shipments, with a price list expected to be delivered to buyers within days. According to traders, the premium for its flagship Arab Light crude, based on conventional pricing using regional benchmarks, is expected to surge to an unprecedented level of around $40 per barrel, compared to just $2.50 in April. Saudi Aramco's monthly contract prices are typically set at a spread relative to a base benchmark comprised of Dubai prices assessed by S&P Global Energy and Oman crude futures on the Gulf Commodity Exchange. Traders say some Asian refiners have already asked Saudi Aramco to link its crude to Brent futures, but other alternatives have also been proposed. These include using oil prices from the Shanghai Futures Exchange, then deducting transportation and other related costs, or even referencing other crudes such as Upper Zakum in the UAE. Traders at refineries that regularly import crude from Saudi Arabia say negotiations between Saudi Aramco and its customers are still ongoing, and no final pricing decision has been made. They added that a premium of around $40 per barrel could lead to reduced purchases. (Jinshi)