Saudi oil price hikes, production cuts drive up price of Norway’s Johan Sverdrup crude

Sherry Su, Bloomberg July 07, 2023

(Bloomberg) – Oil traders are paying record premiums to purchase Norway’s Johan Sverdrup crude, evidence that price hikes and production cuts by Saudi Arabia are starting to affect some corners of the market.

The Johan Sverdrup crude oil field offshore Norway at sunset
Courtesy of Equinor

The grade traded Friday at about $3.50 a bbl more than Dated Brent, a benchmark for physical oil transactions globally. That’s a record and compares with a $6 discount as recently as December, according to traders involved in the market.

Johan Sverdrup, the single largest crude stream in the North Sea, is a relatively dense and sulfur-rich type of oil —- properties that normally mean it trades below Dated. However, Saudi Arabia hiked the premiums it charges for its own barrels — which are similar to the Norwegian grade, triggering the price surge, the traders said.

The kingdom is also limiting global supply to try to support prices. There are also millions of barrels of its crude parked on tankers in Egypt’s Red Sea, waiting to deliver barrels into the Mediterranean. The kingdom’s curbs have had an outsized impact on the supply of so-called medium- and heavy-sour barrels, driving up their price.

At least four term buyers of Saudi crude in Asia and Europe said they will take fewer barrels from the country in August.

Refineries across the Atlantic basin are scrambling to secure alternative supplies with Johan Sverdrup is deemed a favorite replacement. Loadings of the grade is planned to reach record 774,000 bpd in August.

Europe’s oil refineries also depend on supply of Johan Sverdrup because it was one of several replacement varieties when the EU banned seaborne imports of Russian crude late last year.

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