Saudi Arabia, the leading oil exporter, is contemplating raising the official selling price (OSP) for its flagship Arab Light crude in May following the strengthening of Middle East benchmarks last month, as reported by industry sources. A Reuters survey of six refining sources indicated that the May OSP for Arab Light crude could potentially increase by 20 to 30 cents per barrel compared to April. This expectation is supported by the narrowing of the backwardation structure in the Dubai benchmark by 33 cents per barrel in March versus February, indicating a tighter supply scenario when prompt prices exceed future prices.
The May OSP for Arab Extra Light may also see a rise of 30-50 cents per barrel, influenced by higher premiums for similar-quality Murban crude from Abu Dhabi. Robust demand in Asia has bolstered the average premium for May ICE Murban futures to Dubai swaps, reaching $1.73 per barrel last month. Anticipated supply constraints for medium and heavy grades due to oilfield maintenance in Saudi Arabia, OPEC+ production cuts, and increased domestic consumption in various Middle East producing nations are expected to underpin higher May OSPs for Saudi Arabia’s Arab Medium and Arab Heavy grades.
The narrowing losses for Asian refiners on high-sulphur fuel oil have also contributed to supporting prices for Saudi crude, which yields a substantial portion of residue. Saudi Aramco typically releases its crude prices around the fifth of each month, setting the tone for Iranian, Kuwaiti, and Iraqi prices and influencing approximately 9 million barrels per day (bpd) of crude destined for Asia.
The state oil company determines its prices based on customer feedback and evaluations of the oil’s value changes over the previous month, considering yields and product prices. Saudi Aramco officials adhere to a policy of refraining from commenting on the kingdom’s monthly OSPs.