Saudi Arabia may increase the price of its crude oil grades for Asia in September, influenced by rising Middle East benchmark prices. However, weak refining margins might limit the extent of the hikes.
Saudi Aramco, the world’s largest crude oil exporter, is anticipated to raise the official selling price (OSP) for all its crude grades shipping to Asia next month. A Reuters survey of four refining sources suggests that the price of the flagship Arab Light grade could rise by $0.50 to $0.80 per barrel compared to August. This would set the price at a premium of $2.30 to $2.60 per barrel above the Oman/Dubai average.
The Oman/Dubai average serves as the pricing benchmark for Middle Eastern crude exports to Asia.
Recently, the Dubai benchmark has strengthened, with a widening backwardation between the first and third month. Backwardation occurs when front-month contracts are priced higher than those further out, often signaling a market deficit.
Despite this, weak refining margins in Asia might limit the possible price increase. Survey respondents expect the OSPs for all grades to Asia to rise by $0.50 to $0.80 per barrel.
Saudi Arabia usually announces its OSPs for the following month around the fifth day and does not comment on pricing.
The upcoming Saudi pricing announcement for September may provide insights into the country’s view on oil demand.
Before the announcement, the Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel overseeing the oil market, will meet on Thursday. The panel is not expected to suggest changes to the current production policy.
Most observers believe that OPEC+ will likely wait until September to assess summer demand before considering any adjustments to current production cuts.