Saudi Arabia may raise August crude oil prices to Asia

Top oil exporter Saudi Arabia may raise its August official selling price (OSP) for crude sold in Asia, hiking for a third straight month due to rising Middle East benchmarks and a rebound in Asian refining margins, industry sources said.

Three sources from Asian refineries expect the August OSP for flagship Arab Light crude to rise, although forecasts range from $1 a barrel to as much as $3 a barrel, a Reuters survey showed.

A fourth source expects prices to remain flat or rise just 10-20 cents a barrel, while another called on Aramco to roll over its July prices to August or cut by some 50-60 cents a barrel.

“Looking at market structure and margins, OSPs should go up, but actually refiners are not making much money now ... Prompt refining margins improved but forward margins still look lackluster. If OSPs rise by $1-$2, refiners will have a hard time,” the source said.

The front-month Dubai cash futures spread rose by $3.60 in June, thanks partly to tighter supply, while Asia’s margins for gasoline, naphtha, gasoil and jet fuel improved on demand recovery.

LSFO margins were pressured by weak demand and excess supplies, while HSFO margins held relatively firm.

Saudi OSPs for lighter grades such as Arab Extra Light and Arab Light could rise less than for heavier grades, with August-loading peer light sour grades from Abu Dhabi - Murban and Das - traded at discounts to their OSPs in the spot market.

From August, the supply of Middle East crude could increase as OPEC and Russia will likely ease record oil production cuts.

Four OPEC+ sources told Reuters no discussions have taken place so far about extending record 9.7 million barrels per day (bpd) in cuts into August, meaning they were most likely to be eased to 7.7 million bpd until December.

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 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.

Reporting by Shu Zhang; Additional reporting by Koustav Samanta and Roslan Khasawneh; editing by Richard Pullin

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