Asian refiners expect fresh Saudi oil price cuts in June
Asian refiners see Saudi Arabia cutting the official selling prices (OSP) of its crude for a fourth straight month in June after Middle East benchmarks slumped on poor refining margins as the coronavirus pandemic slammed demand.
Saudi Arabia is expected to reduce the June OSP for Arab Light crude by $3.72 a barrel, according to an average of estimates from six refinery sources in a Reuters survey. All respondents said they expect a cut, though predictions ranged from just 50 cents to as much as $7.50.
“Refining margins are not good,” said one of the respondents, who all declined to be identified due to the sensitivity of the matter. “Products are discounted and buyers are few.”
Earlier this month, Saudi May prices for Asian buyers were slashed by $2.95-$5.50 a barrel, in line with expectations.
Oil markets globally are flooded with cheap oil with storage space and floating tanks filling up fast.
Many refiners have lowered output amid coronavirus lockdowns. But Chinese refiners are on the hunt for cheap barrels, increasing processing rates as the world’s second-largest economy gradually picks up steam with its coronavirus outbreak largely contained.
“Their domestic market is an exceptional case,” said another survey respondent.
Prices for Arab Medium and Arab Heavy are expected to fall less than lighter grades due to tighter supply of heavier crude barrels, four of the respondents said.
Asia’s gasoline and naphtha margins NAF-SIN-CRKGL92-SIN-CRK improved in April, while gasoil GO10SGCKMc1 and jet fuel margins JETSGCKMc1 sank to record lows earlier this week.
Margins for low-sulphur fuel oil LFO05SGBRTCMc1 remained pressured, while high-sulphur fuel oil margins FO180SGCKMc1 were helped by tighter crude supply expectations: Producers from Saudi Arabia to Russia are set to cut production by 9.7 million barrels per day (bpd) from May.
Three survey respondents saw price cuts of no more than $2 a barrel for all Saudi grades, citing low crude prices limiting scope for further reductions.
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 bpd of crude bound for Asia.
State oil giant Aramco sets 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.
Below are expected Saudi prices for June (in $/bbl against the Oman/Dubai average):MAY Change est. JUNE OSP
Arab Extra Light -7.40 -7.90/-1.00 -15.30/-8.40
Arab Light -7.30 -7.50/-0.50 -14.80/-7.80
Arab Medium -7.40 -7.40/-0 -14.80/-7.40
Arab Heavy -7.40 -7.40/-0 -14.80/-7.40
Source: Reuters, trade
Reporting by Shu Zhang; Additional reporting by Roslan Khasawneh and Koustav Samanta; Editing by Kenneth Maxwell
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