Saudi oil supply disruptions drive European alternative crude spot premium up to $35 per barrel

Due to the shutdown of Saudi Arabia’s east-west oil pipeline, European refiners are forced to scramble for alternative sources, while soaring fuel prices have further increased the cost of crude oil procurement. After Saudi Aramco’s pipeline to the Red Sea was attacked, the company is now seeking to increase crude shipments through the Strait of Hormuz. This week, Asian buyers purchased tens of millions of barrels of Saudi crude near the strait. However, this shift means that these cargoes are now farther from European refiners who are eager for supplies. On Friday, North Sea crude spot premiums surged to record highs. Previously, Saudi Aramco had informed European customers that next month it would be unable to supply them with crude oil according to long-term agreements. Traders involved in the market say that Norway’s Johan Sverdrup crude, which is similar in quality to Saudi crude, is being quoted up to $35 per barrel above the Brent spot benchmark. Less than two weeks ago, the same grade was trading at a premium of just $0.60 per barrel. The sharp rise in spot crude prices indicates that European refineries are sparing no expense to secure crude supplies in order to keep utilization rates high and ease the squeeze on fuel availability. Currently, diesel prices in the region have risen above $200 per barrel.