Saudi may cut October crude prices for Asia

• Roshan Amiri
• . August 29, 2022
• . Update: August 29, 2022 8:35 pm
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Saudi arabia–Due to weak gasoline demand in the region and rising arbitrage shipments, the world’s top oil exporter Saudi Arabia may lower October pricing for the majority of crude grades it delivers to Asia.

According to five refinery sources surveyed by Reuters on August 29, the state-owned oil company Saudi Aramco may reduce the official selling price (OSP) for its flagship Arab Light crude by roughly $4.50 per barrel in October. After raising September OSPs to record high levels of $10.95 per barrel for Arab Extra Light against the Oman/Dubai average and $9.80 per barrel for Arab Light, it would be the first price decrease for Saudi Arabia in four months.

Discretionary premiums for local standards The prices of Dubai, Oman, and Murban fell in August as demand for Middle Eastern crude oil was hurt by concerns about a possible global economic downturn and the closing disparity between Dubai- and Brent-linked grades. When setting pricing, Saudi Arabia frequently draws inspiration from Dubai’s market structure, which represents the price spread between the first and third months. The spread decreased by roughly $4.26 per barrel in August.

“Asia’s overall demand is not particularly high. Supply fears have generally subsided as more arbitrage cargoes from the United States and West Africa enter Asia “one respondent remarked.

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China, the world’s largest oil importer, may still see low gasoline consumption despite predictions of recovering demand from Indonesia and India once the monsoon season ends in late September. This is because China continues to struggle with COVID-19 limits.

The second-half refinery throughput of Sinopec, the top oil refiner in Asia, is expected to decline by 8% from a year ago, while the annual processing volume for 2022 is expected to decrease by 6% from 2021. Another commenter stated that “certain Saudi cargoes that were sent to the west are now coming back to Asia because to weak demand in Europe, which would also decrease prices.”

To balance the oil market, certain significant oil producers, such as Saudi Arabia and the United Arab Emirates, have hinted at the introduction of production restrictions. The Saudi crude OSPs, which affect the pricing of more than 9 million barrels per day (bpd) of crude destined for Asia, are typically announced around the fifth of every month.

They set the trend for Iranian, Kuwaiti, and Iraqi prices. Saudi Aramco bases the cost of its crude on suggestions from clients as well as an analysis of the change in the oil’s value over the previous month using yields and product prices. As a matter of policy, representatives of Saudi Aramco refrain from commenting on the country’s monthly OSPs.

Below are expected Saudi prices for October (in $/bbl against the Oman/Dubai average): September Change est. October OSP Arab Extra Light +10.95 -4.55/-5.00 +5.95/+6.40 Arab Light +9.80 -3.50/-5.95 +3.85/+6.30 Arab Medium +7.75 -4.00/-5.75 +2.00/+3.75 Arab Heavy +6.00 -3.80/-6.20 -0.20/+2.20.