Saudi Arabia Expected to Raise Oil Prices to Asia

Saudi Arabia could raise the price of its crude grades loading for Asia in September, on the back of higher benchmark prices in the Middle East, but weak refining margins could limit the potential hikes.  

Saudi Aramco, the world’s top crude oil exporter, is expected to raise the official selling price (OSP) of all its crude grades loading for Asia next month, according to a Reuters survey of four refining sources.

The Kingdom could raise the price of its flagship Arab Light grade by between $0.50 and $0.80 per barrel for September compared to August prices, to a premium of between $2.30 and $2.60 per barrel over the Oman/Dubai average.

The Oman/Dubai average is the benchmark on which Middle Eastern crude exports to Asia are priced.

The Dubai benchmark has strengthened over the past few weeks with backwardation widening between the first and third month.

Backwardation typically occurs at times of market deficit, and in it, prices for front-month contracts are higher than the ones further out in time.

However, refining margins are weak in Asia and could limit the potential of a Saudi price hike for September, some of the respondents in the Reuters survey said.

They expect the OSPs of all grades to Asia to be raised by between $0.50 and $0.80 per barrel. 

Saudi Arabia typically announces its OSPs for the following month around the fifth of each month and does not comment on the pricing.

The Saudi announcement of its oil pricing for September could give the market some clues about where the Saudis think oil demand is going.

Before the announcement, the Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring the oil market, is meeting on Thursday.

The panel is not expected to recommend any changes to the group's current production policy plan.

Most market observers reckon that OPEC+ would wait to see how summer demand will have held up by September, before potentially starting to unwind part of the current production cuts.

By Tsvetana Paraskova for Oilprice.com

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