Saudi Arabia is expected to reduce prices to Asia
Saudi Arabia to cut January crude prices to Asia
SINGAPORE, December 1, 2015
Top oil exporter Saudi Arabia is expected to reduce prices for its crude sold to Asia in January from a month ago after the Dubai benchmark weakened, trade sources said.
The forecast price cuts ahead of the Opec meeting follow a drop in Dubai crude benchmark in November to the lowest in close to seven years in an oversupplied market as producers ramp up output in a global market share fight.
The Organization of the Petroleum Exporting Countries is pumping close to a record high in November while Russian oil firms are drilling more.
"As long as the market is oversupplied, oil prices should remain subdued with little connection to fundamentals," Morgan Stanley analysts said in a note.
The official selling price (OSP) for Saudi's flagship Arab Light crude could fall by 20-40 cents in January from the previous month while Arab Extra Light may see a smaller price cut due to strong naphtha cracks, a survey of six refiners and traders said.
Asia's naphtha crack to Brent averaged at $111.93 a tonne in November, the highest since September 2014.
Tighter supply of rival Abu Dhabi light crude may also support Arab Extra Light, one respondent said. Last month, January-loading cargoes of light grades such as Murban and Das traded in premiums after Abu Dhabi National Oil Company cut supplies due to field maintenance.
The OSPs for Arab Medium and Heavy crude are predicted to drop by 50-60 cents a barrel although one respondent expected just a 5-cent trim for Arab Heavy due to stronger fuel oil cracks.
Fuel oil crack to Dubai improved to an average of minus $7.27 a barrel in November, the strongest in six months.
The market is also gearing up for a boost in supply from Iran once sanctions on its oil exports are lifted.
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
