Saudi Arabia has kept output at near record levels in April
Saudi Arabia seen keeping crude OSPs steady in June
SINGAPORE, April 30, 2015
Top oil exporter Saudi Arabia is expected to keep prices mostly unchanged in June for grades it exports to Asia, following two straight months of increases, in line with a steady Dubai structure.
The Opec producer in the past two months raised prices for all grades to buyers in Asia as robust refining margins supported demand in the region.
Saudi Arabia has kept output at near record levels in April in a fight for market share that began as prices plummeted in the second half of last year amid a global supply glut.
The official selling price (OSP) for its flagship Arab Light has been in a discount to Oman/Dubai quotes since last October, and traders expected the grade to stay at a discount for June, amid stiff competition from other key producers.
Three of five traders who took part in a Reuters survey expected the OSP for Arab Light to stay unchanged or fall slightly, while two traders said prices for the flagship grade could be set slightly higher.
Brisk demand supported the Middle East spot market in April, but the market slowed towards the end of the month, keeping Dubai's prompt inter-month spread mostly steady in contango overall in April compared to March, a trader said.
In a contango market, oil for prompt delivery is cheaper than supply in future months.
"The only question is whether Saudi Aramco will consider further securing market share in Asia," said a trader with a refiner. "In that case they'd need to give incentives for refiners (to buy)."
The OSP formula is loosely based on the average monthly changes in the spread between the first and third month Dubai cash prices and refining margins for oil products.
"Refining margins are still ok, but I think many are concerned about middle distillates, especially the gasoil crack," said another trader.
Weaker naphtha cracks NAF-SIN-CRK could narrow the spread between Arab Extra Light and the medium and heavier grades, a trader said. However, stronger gasoline cracks GL92-SIN-CRK would probably keep changes in the spread in check.
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 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.
--Reuters
