SINGAPORE : Top oil exporter Saudi Arabia may raise prices of light crude grades to Asia for the second straight month in August on the back of record distillate margins and strong spot premiums for Middle Eastern oil this month.
The official selling price (OSP) for Saudi's flagship Arab Light crude could rise by about $2.4 a barrel from the previous month, according to nine refining sources surveyed by Reuters on June 28-29.
The price hike would drive the August OSP close to record levels, set when May Arab Light crude reached $9.35 a barrel.
"Refining margins are very solid and we expect demand to stay robust in the near term," said one of the respondents.
Margins for gasoline, diesel and jet fuel in Asia leapt to records in June alongside a revival of travel demand amid the easing of COVID-19 restrictions.
Spot premiums of medium-sour Oman and Dubai crude have climbed to their highest since mid-March, while light sour Murban soared to a record last week.
The monthly change in first- and third-month price spread for Middle East benchmark Dubai typically guides how much Saudi might raise or cut Arab Light's OSP.
This month, the spread widened by an average of $2.47 a barrel in backwardation – a market phase when prompt prices are higher than those in future months, indicating tight supply.
Major producers Saudi Arabia and the United Arab Emirates have flagged limited spare capacity to further boost production, while political unrest in Libya and Ecuador could further tighten oil supply.
Meanwhile, China issued 52.7 million tonnes of fresh crude oil import quotas to its independent refiners, up 49 per cent from the same allotment last year. That will allow Chinese buyers to take more crude cargoes from the already tight global market, further driving up prices.
For other grades, respondents to Reuters' survey expect OSP for Arab Medium to rise $0.50 to $3.00 a barrel, and Arab Heavy to increase $0.50 to $2.90 a barrel.
OSP for Arab Extra Light, which typically follows Murban prices, is seen being raised as much as $5.35 a barrel. Average spot premiums of IFAD Murban against Dubai quotes increased $4.38 a barrel in June from the previous month.
Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude bound for Asia.
Saudi Aramco is likely to release monthly prices after a meeting between the Organization of the Petroleum Exporting Countries and producer allies on Thursday.
Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.
Below are expected Saudi prices for August (in $/bbl against the Oman/Dubai average):JUL Change est.AUG OSP
Arab Extra Light +7.15 +2.30/+5.35 +9.45/+12.50
Arab Light +6.50 +2.00/3.15 +8.50/+9.65
Arab Medium +6.15 +0.50/+3.00 +6.65/+9.15
Arab Heavy +4.80 +0.50/+2.90 +5.30/+7.70
Source: Reuters, trade
(This story corrects the M1/M3 spread to $2.47 in paragraph 8, not 7.58 cents)