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Saudi Arabia is expected to reduce the price of its crude oil going to Asia in August to reflect market movements, a Reuters survey of six Asian refining sources showed on Monday.
Saudi Aramco, the world’s top crude oil exporter, is set to reduce the official selling price (OSP) for the flagship Saudi grade, Arab Light, by around $0.50 per barrel compared to the loadings for July, according to the Reuters poll.
Saudi Arabia typically announces on the fifth of each month the OSPs for the following month and its pricing policy is generally followed by most of the other large Middle Eastern crude oil exporters.
Last month, Saudi Arabia raised the OSP for its flagship grade Arab Light for Asia for July by $0.45 per barrel to a premium of $3.00 over the Oman/Dubai average, off which Middle East crude for Asia is priced. The price for July was the highest premium against the Oman/Dubai benchmark in six months.
The price hike came as a surprise to the market, which had expected a cut in prices.
A day before the price hike for July, the OPEC+ producers decided to keep the current cuts until the end of 2024, while OPEC’s top producer, Saudi Arabia, said it would voluntarily reduce its production by 1 million bpd in July, to around 9 million bpd. The cut could be extended beyond July, Saudi Energy Minister Prince Abdulaziz bin Salman said.
For August, Asian refiners expect the Saudis to cut the OSPs for Arab Extra Light, Arab Light, and Arab Medium, while some refiners expect Arab Heavy prices to be raised, according to the Reuters poll.
Last month’s unexpected price hike has reduced refining margins at the Asian refiners who now expect the Saudis to cut prices.
“Saudi needs to trim prices to reflect the market movements. They have gone a bit too far from the reality in the past few months,” one respondent in the Reuters survey said.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.