Saudi Arabia will raise Asian light crude oil prices in July

According to Oil Monster news on June 1, the world's largest oil exporter Saudi Arabia is expected to slightly increase the official selling prices (OSPs) of Asian light crude oil in July.

Sources from five Asian refiners predict that the OSP of Saudi Arabia’s flagship Arabian light crude oil will rise by 10 cents per barrel in July, and their forecasts range from unchanged to 20 cents.

The expected adjustment of Arabian Light crude oil follows the price trend of Middle East crude oil benchmarks Cash Dubai and DME Oman.

However, three interviewees said that the weakness of Asian refining profit margins, especially fuel oil profit margins, is expected to lead to a decline in the price of crude oil for Saudi Arabia's heavier crude oil grades in July.

They expect the price of Arab medium-sized crude oil to fall by 10-30 cents per barrel, and the price of Arab heavy crude oil to fall by 40-70 cents per barrel.

The price of very low-sulfur fuel oil in Asia fell sharply to a five-month low in the second half of May, due to concerns about the lack of demand for spot fuels and the power generation industry due to sufficient supply.

With the rapid increase in the number of new coronavirus infections in parts of Asia, people's demand for transportation fuel has raised concerns.

Last month, due to the relatively rapid recovery of demand in the West, which promoted arbitrage shipments outside Asia, gasoline and aviation fuel benefited from the increase in refining profit margins, but in several regional markets, they were also trapped by weak demand caused by the epidemic.

Market attention is also focused on the meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+) on Tuesday, in which oil-producing countries may insist on slowly relaxing supply restrictions.

Saudi crude oil futures contracts are usually released around the 5th of each month and set a trend for prices in Kuwait and Iraq, affecting more than 12 million barrels of crude oil shipped to Asia every day.

The state-owned oil giant Saudi Aramco sets crude oil prices based on customer recommendations, and calculates changes in the value of oil in the past month based on output and product prices to determine its crude oil prices.

Saudi Aramco officials do not comment on monthly operating results due to policy considerations.

Feng Juan excerpted and translated from Oil Monster

The original text is as follows:

Saudi Arabia Expected to Raise July Light Crude Prices for Asia

Top oil exporter Saudi Arabia is expected to slightly increase its July official selling prices (OSPs) of light crude for Asia, as margin weakness and demand uncertainty cap showed the upside despite stronger crude benchmarks, a Reuters survey.

Sources at five Asian refiners on average expected the July OSP for Saudi flagship grade Arab Light to rise by 10 cents a barrel, with their forecasts ranging between no change to an increase of up to 20 cents.

The expected adjustment for Arab Light tracked the price strength in Middle East crude oil benchmarks Cash Dubai and DME Oman, which in May saw their premiums to Dubai swaps up by 14 cents and 8 cents respectively from April.

　　But weakness in Asia's refining margins, also known as cracks, in particular for fuel oil, is expected to bring cuts in July OSPs for heavier Saudi crude grades, according to three of the respondents.

　　They forecast a price reduction of 10-30 cents a barrel for Arab Medium and a cut of 40-70 cents a barrel for Arab Heavy.

　　Asia's crack for 0.
5% very low-sulphur fuel oil (VLSFO) fell sharply in the second half of May to five-month lows amid concerns of ample supplies and weak demand in the spot bunkering and power generation sectors.

　　Asia's crack for gasoline also took a beating in May as fresh mobility restrictions amid a sharp rise in coronavirus cases from new variants in parts of Asia raised demand concerns for transportation fuels.

　　Gasoil and jet fuel, which benefited from higher refining margins last month thanks to a relatively faster demand recovery in the West that was boosting arbitrage shipments out of Asia, also struggled with COVID-19-induced demand weakness in several regional markets.

　　The market's attention was also on a Tuesday meeting by the Organization of the Petroleum Exporting Countries and its allies, a grouping known as OPEC+, in which the producers are likely to stick to a slow easing of supply curbs.

　　Saudi crude OSPs are usually released around the fifth of each month, and set the trend for 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.

　　Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.