Top oil exporter Saudi Arabia is likely to cut its September official selling price (OSP) for crude sold in Asia, according to industry sources.
Five sources from Asian refineries on average expect the September OSP for flagship Arab Light crude to fall by 61 cents a barrel, though forecasts range from a cut of $1 to 20-30 cents, a Reuters survey showed.
Slow demand recovery amid the second wave of COVID-19 infections has depressed spot prices for Middle Eastern crude this month, while Asia’s refining margins remained weak, they said.
Although the monthly average of cash Dubai’s premium to swaps dipped by only 6 cents this month, DME Oman and cash Dubai this week turned to discounts to swaps for the first time since May, data compiled by Reuters showed.
Prompt Dubai has flipped from backwardation into contango in late July. The contango structure, where prompt prices are lower than future prices, usually indicates an immediate oil surplus.
Asia’s margins for gasoline, jet fuel and high sulphur fuel oil weakened in July, while cracks for naphtha, gas oil and low sulphur fuel oil showed improvement.
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.
Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.