By Florence Tan
SINGAPORE (Reuters) – Top oil exporter Saudi Arabia may cut prices for crude grades it sells to Asia for a second month in August. This follows the weakness of benchmark Dubai in the Middle East, trade sources said on Friday.
The potential price cut for Asia, which accounts for about 80% of Saudi oil exports, underlines the pressure OPEC producers face as supply from non-OPEC countries continues to grow while the global economy faces headwinds.
The official retail price (OSP) for flagship Arab Light crude sold to Asia in August could fall by 60 cents to 80 cents per barrel from July, possibly to the lowest level since April, four Asian refinery sources said in a Reuters survey.
Respondents expect slightly deeper price cuts for the heavier grades – Arab Medium and Arab Heavy – than Arab Light due to improving supply from Mexico and Canada.
Relatively higher prices for Saudi oil prompted refiners in China to reduce imports from Saudi Arabia for the third month in a row in July.
The potential price cuts for August are expected to lead to a narrowing of monthly price differentials in Dubai by 85 cents this month from May, a sign of tight supply reduction. Backwardation refers to higher prompt prices than those in the coming months.
Global crude futures are supported by OPEC+ cuts and peak summer demand in the Northern Hemisphere, which is expected to lead to a supply crunch this quarter, although analysts expect more supply to come from non-OPEC producers in America. [O/R]
The average margin at a complex refinery in Singapore, the benchmark for Asian refineries, stabilized at $3.62 per barrel over the past 15 days after falling for two months in a row, LSEG data showed. Saudi crude OSPs are usually released around the fifth of every month. and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude oil heading to Asia.
State oil giant Saudi Aramco (TADAWUL:) sets its crude oil prices based on customer recommendations and after calculating the change in the value of its oil over the past month, based on yields and product prices.
Saudi Aramco officials do not comment on the kingdom’s monthly OSPs as a matter of policy.
Below are the expected Saudi prices for August (in $/bbl against the Oman/Dubai average):
JULY Change in estimated AUG OSP
Arabic Extra Light +2.20 -0.65 +1.55
Arabian light +2.40 -0.80/-0.60 +1.60/+1.80
Arabic Average +1.95 -0.80/-0.70 +1.15/+1.25
Arabic Heavy +1.20 -0.80/-0.65 +0.40/+0.55
Source: Reuters, trade
