By Florence Tan
SINGAPORE (Reuters) – Top oil exporter Saudi Arabia is expected to cut prices for most of the crude grades it sells to Asia in October after Middle East benchmark Dubai slumped last month, industry sources said on Monday.
The October official selling price (OSP) for flagship Arab Light crude is expected to fall between 50 and 70 cents a barrel, three of five refining sources said in a Reuters survey, to track a similar trend for Dubai price spreads last month.
Such a price cut would also reflect weak refining margins especially in China where sluggish manufacturing and property sectors are squeezing fuel demand, the sources said.
“Margins are bad now overall and worse in China,” one of the sources said, adding that September which is typically the best month for oil demand could disappoint this year.
OPEC+ supply is also set to rise from October as eight of the group’s members are scheduled to boost output by 180,000 barrels per day next month, as part of a plan to begin unwinding their most recent layer of output cuts of 2.2 million bpd while keeping other cuts in place until end-2025.
However, another two respondents expect Arab Light’s OSP for October to remain little changed. This was partly because the Dubai benchmark had strengthened in the final week of trade last month, one of them said.
For heavier grades – Arab Medium and Arab Heavy, three of the five respondents expect October prices to be reduced by less than 50 cents, supported by robust fuel oil demand, while the remaining two expect price cuts of 60 to 80 cents a barrel.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.
Below are expected Saudi prices for October (in $/bbl against the Oman/Dubai average):
SEPT Change est.OCT OSP
Arab Extra Light +1.70 -0.50/-0.20 +1.20/+1.50
Arab Light +2.00 -0.70/0.00 +1.30/+2.00
Arab Medium +1.25 -0.70/-0.25 +0.55/+1.00
Arab Heavy +0.50 -0.80/-0.30 -0.30/+0.20
Source: Reuters, trade
(Reporting by Florence Tan; editing by David Evans)
