Asian crude buyers expect Saudi Arabia to raise its August official selling price (OSP) for the Arab Heavy crude that it sells to Asia to the highest in more than 3 years.
A tighter market for heavy crude grades in Asia amid the OPEC production cut has led to record refining profits on making fuel oil in Asia, Reuters reported on Monday, citing trade sources-a perfect opportunity for lifting prices.
According to four Asian buyers, Saudi Arabia's oil giant Saudi Aramco is seen raising the OSP for Arab Heavy for Asia by US$0.20 per barrel, to US$1.65 below the average Oman/Dubai benchmarks for August, which would be the slimmest discount since December 2013.
"Maybe they [Saudi Aramco] will cut Arab Heavy supplies for August because of the OPEC cut and summer demand for power generation," a trader with a refiner in North Asia told Reuters.
A fifth source briefed by Reuters said that it expected the Arab heavy price to Asia to remain unchanged from July prices.
If Saudi Aramco does raise its heavy crude prices to Asia, demand for heavy varieties from other Middle Eastern producers such as Russia, Angola-as well as America-could rise as well.
Last month, Saudi Arabia raised its OSPs for all of its crude grades sold to Asia in July, in line with market expectations. Related: What Oil Needs To Rally Higher
The price of the Arab Heavy for Asia was raised by US$0.95 per barrel for July, to a US$1.85 discount to the Oman/Dubai average. The price of the flagship Arab Light for Asian customers was raised by US$0.60 a barrel compared to June, to a discount of US$0.25 a barrel to the Oman/Dubai average.
According to the Asian sources surveyed by Reuters, for August, Saudi Arabia is expected to reduce the Arab Light price by US$0.20 a barrel, to the lowest in two months, after a weakening Dubai market in June.
Saudi Arabia's exports to Asia, as well as to the U.S., have been dropping lately, according to ClipperData.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More