March 19, 2020 / 11:03 AM / 18 days ago

Saudi Aramco cuts freight compensation for European buyers as rates jump - document

MOSCOW, March 19 (Reuters) - Saudi Aramco told its customers in Europe it will cut compensation payments for freight costs because of extraordinary conditions in the freight market, a memo sent to customers on Wednesday and seen by Reuters showed.

“In a reference to a Saudi Aramco Freight Protection Policy, kindly note that due to current extraordinary freight market conditions, the freight protection calculation will be limited to 10% of the Saudi Aramco official selling price (regional price marker + monthly differentials),” the note said.

The freight protection policy applies to refiners in Europe and compensates for the transport costs between Ras Tanura in Saudi Arabia and Sidi Kerir in Egypt, traders said.

Saudi Arabia’s plans to increase oil exports have driven freight rates to record levels.

The development may prompt people to review their purchases from Saudi Aramco and call into question the Kingdom’s plan to increase exports, two traders in the European market said, asking not to be named.

Saudi Aramco did not give an immediate response to Reuters request for comment. (Reporting by Olga Yagova, additional reporting by Rania El-Gamal; editing by Barbara Lewis)

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