SINGAPORE: Top oil exporter Saudi Arabia may keep term prices of crude it sells to Asian customers little changed in April versus March following a slight rise in Middle East benchmark prices, several trade sources said.
The official selling price (OSP) of flagship Arab Light crude could stay unchanged or rise by 10-20 cents a barrel in April, according to a Reuters survey of six refining sources.
This comes after the prompt Dubai market structure widened in backwardation by 10 cents in February from the previous month, Reuters data showed.
Backwardation is when prompt prices are higher than those in future months, indicating tight supply.
“The market structure and product cracks didn’t change too much compared to last month, and I think now with Red Sea shipping still having uncertainty probably they will want to push the barrels to Asia,” one of the sources said.
Attacks by Yemeni Houthis on ships in the Red Sea - they say in solidarity with Palestinians against Israel’s military actions in Gaza - have caused freight and insurance costs to spike and slowed Middle East oil shipments to Europe.
The March Arab Light OSP at $1.50 is about 45 cents higher than the cash Dubai benchmark price in February.
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The price gap narrowed sharply from previous months after Saudi Aramco brought its OSPs closer to benchmark prices, another source said.
“We think Saudi should be quite comfortable with the 45-cent premium for term cargoes,” he said.
For the other grades, three of the sources expect Saudi Aramco to keep prices for all crude grades stable in April.
A fourth expects cuts of 90 cents and $1 a barrel for Arab Extra Light and Arab Heavy, respectively, and another sees a 50-cent cut for Arab Medium.
Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 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.
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