LONDON: Saudi Aramco is changing the formula it uses to price its long-term crude oil sales to Asia in a move aimed at improving the overall reliability of its pricing.

It represents the first change to benchmarks for its official selling prices (OSP) since the mid-1980s, the company said on Wednesday.
Reuters earlier reported the planned changes from industry sources.

Saudi Aramco鈥檚 long-standing price marker was the average of Platts Dubai and Platts Oman assessments.

The company鈥檚 new Asia marker will replace Platts Oman with Dubai Mercantile Exchange (DME) Oman effective Oct. 1, 2018, effectively creating a hybrid between two major Asia benchmarks.

鈥淲e鈥檙e rebalancing our Asia marker to ensure that it is underpinned by a broad and vibrant marketplace,鈥� said Ahmed Subaey, Saudi Aramco鈥檚 vice president of marketing, sales and supply planning.The inclusion of the DME Oman price complements the existing Platts Dubai price to provide our customers with better visibility into price dynamics.鈥�

He said that the idea behind the change was to make sure the marker was market-reflective, well regulated and predictable.

Launched more than a decade ago, the DME Oman contract has become the most liquid physically deliverable futures contract for Middle East crude oil.

鈥淚t is obvious 鈥� look at the trading volumes of DME versus Platts for Oman,鈥� Adi Imsirovic, a teaching fellow at the University of Surrey鈥檚 Energy Economics Center told Reuters.

Saudi Aramco鈥檚 decision could improve the liquidity for Oman futures trading on the DME and also for derivative instruments based off the Oman contract for hedging or price conversion purposes, a Singapore-based trader told the newswire.

鈥淭his is a good change as Platts Oman cannot be hedged,鈥� he said.

Gulf oil exporters including 萝莉视频 and the UAE want to boost oil exports to Asia as they increasingly compete with US exports to the region.

Saudi authorities plan to list 5 percent of Aramco on the Tadawul exchange and an as-yet unspecified stock market with London and New York competing for the prize listing that has been touted as the world鈥檚 biggest IPO.

The oil giant has spare capacity of 2 million barrels per day (bpd) and can meet additional oil demand in case of any interruption in supplies, the company said this week.

The world鈥檚 third largest crude oil supplier currently produces about 10 million bpd and has the capacity to produce 12 million bpd, CEO Amin Nasser said.

OPEC and non-OPEC producers including Russia have agreed on small increases in oil production from July, after pressure from major consumers to curb rising costs.