Top oil exporter Saudi Arabia could raise the official selling prices (OSPs) for most of its crude in July on support from a wider Dubai backwardation, stronger fuel oil cracks and firm spot demand for Arab Medium, according to a Reuters poll.

OSPs for most of the Saudi grades will rise, except for Arab Extra Light, which is capped by weak naphtha cracks, the poll of refiners and traders showed.

"The structure at the end of this month is stronger than at the end of last month," a trader said, adding that this supports a rise for benchmark Arab Light.

"The heavier the better due to stronger fuel crack, but the lighter the worst due to weak light end cracks."

Front-month Dubai spread widened sharply to more than 80 cents a barrel in backwardation on May 31, up from 56 cents on April 30. Immediate prices are higher than those in future months in a backwardated market, suggesting stronger demand for prompt cargoes.

Firm demand for spot July Banoco Arab Medium in Asia will also provide some support. The grade, a good substitute for Iranian crude, traded in the July spot market at premiums of 30-40 cents a barrel to OSP.

Arab Heavy could rise as much as $1 a barrel as it will get a boost from peak summer demand and stronger fuel oil cracks  which narrowed in May to hit a three-month high.

But the pressure is on naphtha-rich Arab Extra Light as the light fuel's margin slipped in May to the lowest in six months after the global economic slowdown dampened China's petrochemical demand.

"This time it won't be lowered by too much as Saudi Aramco has already gave it a big cut in June," a trader said.

Most Asian refiners bought Middle East crude for July loading at discounts amid ample supply, dashing expectations that Western sanctions on Iran will reduce volumes from the region, traders said.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting some 7 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