Top oil exporter Saudi Arabia is expected to slightly increase its crude prices for Asian customers in March in line with a stronger Dubai benchmark price, according to Reuters.
The March official selling price (OSP) for flagship Arab Light could rise by 10-30 cents a barrel from the previous month, a Reuters survey of sources from three refineries and a trading company showed.
“It’s simply because of the market structure as the contango is slightly shallower,” one of the sources said, referring to a market structure where the price for prompt delivery is lower than prices for future months.
The spread between the first and third month Dubai cash prices narrowed about 15 cents in January from a month ago, traders said, pointing to a stronger front-month price against later months.
Arab Extra Light may receive a boost from stronger naphtha cracks which rose to the highest in a year in January although a possible sharp price cut for rival Abu Dhabi grade Murban may cap the Saudi grade’s price gain, the trader said.
Abu Dhabi National Oil Company (ADNOC) is trying to push more prompt cargoes to term lifters following a domestic refinery outage so they would have to compensate buyers with a bigger price cut for Murban, he said.
For heavier crude such as Arab Medium and Arab Heavy, the respondents expect prices to remain unchanged or edge up as weaker fuel oil cracks weigh on these grades.
Asia’s fuel oil crack in January is at the widest discount to Dubai in three months.
Last month, state oil giant Saudi Aramco kept February oil exports to most buyers in Asia steady, but cut term supplies to a handful of refiners in India and Southeast Asia as it complies with an OPEC deal. Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12mn barrels per day (bpd) of crude bound for Asia.
Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.
Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.
