01-06-2016

Saudi Arabia Likely To Hike Asia Crude Prices In July On Strong Dubai

oil

Top oil exporter Saudi Arabia is expected to raise the prices for most crude grades it sells to Asia in July to track a stronger Dubai benchmark, trade sources said on Tuesday.

The July official selling price (OSP) for flagship Arab Light is expected to climb 25 cents to 50 cents a barrel, up for a second month after rising to the highest since September 2014 in June, a survey of five refiners and traders showed.

Bigger-than-expected price hikes for June last month took some traders by surprise as they had expected state oil giant Saudi Aramco to keep its prices competitive against other Middle East producers in a battle for market share.

“Last month Saudi OSPs were biased to the upside, although it’s not clear if that marks a change of strategy,” a Singapore-based trader said.

“The thing to watch for this month is whether or not they’ll continue to surprise on the upside.”

Saudi Aramco is expected to raise prices for the four grades by 50 cents a barrel if the company fully tracks the gains in the Dubai benchmark during May, survey respondents said. Three of the five respondents expect the increases to be moderated.

The July price hikes come after Saudi Arabia offered more crude to some Asian buyers in June after it completed oilfield maintenances earlier than expected.

The producer will also have more Arab Extra Light crude for sale once it ramps up expanded production from its Shaybah field.

Saudi Aramco is expected to moderate the July price hike for Extra Light after its June OSP jumped to $2.60 a barrel above Oman/Dubai quotes, the highest since September 2014. That level is near to the competing Murban grade produced in the United Arab Emirates.

“With Murban’s OSP at $3 a barrel above Dubai quotes, Arab Extra Light looks less attractive,” a trader with a North Asian refiner said.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Source: Reuters

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