Saudi Arabia, the world’s leading oil exporter, has announced an increase in most of its crude oil prices to Asian customers for the second month in August. This follows the decision to extend an additional output cut on top of an existing OPEC+ deal.
The official selling prices (OSP) for August-loading Arab Light to Asia increased by 20 cents a barrel from July, reaching $3.20 a barrel over Oman/Dubai quotes, according to a state oil behemoth Saudi Aramco statement.
Although the market largely anticipated the price hike, some Asian refiners, as per a Reuters survey, expected a price drop of around 50 cents due to poor refining margins and competition from other regional crude oil suppliers.
Implications for Refining Margins in Asia
Earlier this week, Saudi Arabia declared its intention to extend its voluntary oil production cut of 1 million barrels per day (bpd) through August while keeping the option open to extend the reduction further.
Last month, shortly after its unexpected pledge to voluntarily reduce output by 1 million bpd in July, the de facto OPEC+ leader raised its July OSPs to Asia.
The more costly Saudi oil could exert additional pressure on the already slim refining margins in Asia, causing refiners to seek alternatives from other Middle Eastern suppliers or regions such as the U.S. and West Africa, especially as the spread between Brent- and Dubai-pegged oil has narrowed.
While maintaining the price for Extra Light crude to Asia at $2.55 a barrel over Oman/Dubai quotes in August, Saudi Arabia increased the OSPs for Arab Medium and Arab Heavy by 20 cents, reflecting more robust refining margins for fuel oil.
In other regions, Saudi Arabia boosted its August Arab Light OSP to northwest Europe by 80 cents to $3.80 a barrel above ICE Brent. It also increased the OSP to the United States by 10 cents in August from the previous month at $7.25 versus ASCI.
