Saudi Arabia may raise August crude prices to Asia to approach record levels

A general view of Aramco tanks and oil pipelines at the Ras Tanura oil refinery and Saudi Aramco oil terminal on May 21, 2018. REUTERS/Ahmed Jadallah/File Photo

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SINGAPORE (Reuters) – Top oil exporter Saudi Arabia may raise prices of light sweet crude grades to Asia for a second month in a row in August on the back of record distillate margins and strong premiums on Middle East oil this month.

The official selling price of the main Saudi Arabian Light crude could rise by about $2.4 a barrel from the previous month, according to nine refining sources polled by Reuters on June 28 and 29.

A price hike would push the August official selling price close to record levels, which were set when Arab Light crude for May hit $9.35 a barrel.

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“Refining margins are very strong and we expect demand to remain strong in the near term,” said one survey participant.

Margins for gasoline, diesel and jet fuel in Asia jumped to record levels in June along with a rebound in travel demand amid the easing of COVID-19 restrictions.

Spot premiums for Oman and Dubai crude average sulfur rose to their highest levels since mid-March, while premiums in Murban jumped to a record high last week.

The monthly change in the spreads for the first and third months of the Middle East Standard usually directs Dubai how far Saudi Arabia may raise or lower Arab Light’s OSP.

This month, the spread widened by an average of $2.47 a barrel in the event of a pullback – a phase in the market when spot prices are higher than those in the coming months, indicating tight supply.

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Meanwhile, China issued 52.7 million tons of fresh crude oil import quotas to independent refineries, 49% more than the same allotment last year. This will allow Chinese buyers to take more crude oil shipments from an already tight global market, driving up prices even more.

For other grades, respondents to the Reuters poll expect the average Arab OSP to rise by $0.50 to $3.00 a barrel, and the Arab Heavy will rise by $0.50 to $2.90 a barrel.

The ultra-light Arab OSP, which typically follows Murban prices, is expected to rise by as much as $5.35 per barrel. The average spot premium for the Murban Fund against Dubai prices increased by $4.38 per barrel in June compared to the previous month.

The official selling prices for Saudi crude set the direction for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day of crude destined for Asia.

Saudi Aramco is likely to announce monthly prices after a meeting between the Organization of the Petroleum Exporting Countries (OPEC) and allied producers on Thursday.

Saudi Aramco officials do not comment as a matter of policy on the kingdom’s monthly OSPs.

Here are the expected Saudi prices for August (in dollars/barrel vs. Oman/Dubai average):

Source: Reuters, Commerce

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(Reporting by Moyo Shu and Florence Tan) Editing by Kenneth Maxwell

Our Standards: Thomson Reuters Trust Principles.

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