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Top oil exporter Saudi Arabia is expected to cut prices of most crude grades it sells to Asia in August after Middle East benchmarks weakened last month. trade sources said on Tuesday.
That would mark the first reduction in Saudi crude prices to Asia in five months after sanctions on Venezuela and Iran tightened supplies and boosted prices for replacement oil from the Middle East.
The official selling price (OSP) for flagship Arab Light crude to Asia could fall between 30 and 50 cents a barrel in August after hitting the highest since January 2014 in July. a Reuters survey of five refiners showed.
That would track a narrower Dubai backwardation last month. they said. Spot prices are higher than those in future months in a backwardated market.
“The (official selling) prices need to come down because (spot) prices could drop further next month.“ one of the respondents said. citing weaker spot Dubai prices at the start of this month’s trade for September-loading cargoes.
The respondents expect prices for medium and heavy crude to drop slightly less versus light grades on robust demand for heavier oil used to replace Iranian oil of similar quality.
Arab Medium and Arab Heavy OSPs for July were at their highest since January 2012. Refinitiv data showed. 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 12 million barrels per day (bpd) of crude bound for Asia.
State oil giant 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.
The Organization of the Petroleum Exporting Countries agreed on Monday to extend oil supply cuts until March 2020 as the group’s members overcame their differences in order to prop up the price of crude amid a weakening global economy and soaring U.S. production.
