Saudi Arabia, the world’s top oil exporter, is expected to raise the official selling prices (OSPs) for most of the crude grades it sells to Asia in June to their highest levels in five months. This move is in response to strengthening Middle East oil benchmarks during the month.
According to a Reuters survey of seven refining sources, the June OSP of the flagship Arab Light crude may rise by 70 to 90 cents, bringing it close to a $3 per barrel premium over the average of Dubai and Oman quotes. This would be the highest level since January.
The price hikes are expected to track a wider backwardation, or a situation where prompt prices are higher than those in future months, in the Platts Dubai and DME Oman benchmarks. The backwardation has increased to 83 cents and 96 cents, respectively, so far this month compared to the previous month’s average, indicating tight supply.
Most respondents also expect the June OSPs for Arab Medium and Arab Heavy to rise in line with Arab Light, supported by tight supply amid OPEC+ production cuts and robust fuel oil margins.
However, the price increase for Arab Extra Light is expected to be more modest, ranging from 30 to 50 cents, as strong light crude supply and weak naphtha margins are expected to limit the gains.
The change in the feedstock at Abu Dhabi National Oil Co’s (ADNOC) Ruwais refinery, with the company now processing more Upper Zakum crude, has reduced exports of the medium sour grade. Meanwhile, Mexico’s Pemex has reversed its planned crude export cuts of at least 330,000 barrels per day for May, partially easing the tight supply situation.
Saudi Aramco, the state-owned oil company, sets its crude prices based on recommendations from customers and the change in the value of its oil over the preceding month, taking into account yields and product prices.