Stronger Dubai, oil products margins to support price hikes
Saudi to raise December crude prices to Asia
SINGAPORE, November 2, 2015
Top oil exporter Saudi Arabia is likely to raise the prices of most crude grades it sells to Asia in December on a stronger Dubai benchmark and better fuel oil margins, traders said on Monday.
The Opec kingpin could raise the December official selling price (OSP) for flagship Arab Light by 30-60 cents a barrel from a month ago, a survey of six refiners and analysts showed.
"We expect a slight increase of about 50 cents across all grades as the products markets, especially fuel oil and naphtha, have improved," a trader at a North Asian refinery said.
The contango spread between the first and third month cash Dubai prices narrowed about 35 cents in October from a month ago, indicating a stronger market and underpinning price hikes for Saudi crude exports to Asia, traders said.
The loss from producing a barrel of fuel oil from crude has also narrowed sharply in the past month, supporting prices for the heavier Saudi grades that yield more of the residue fuel, they said.
Five of the six respondents expect Arab Medium to rise by 30-60 cents a barrel with one forecasting a $1.04 hike.
The respondents were divided on their forecasts for Arab Heavy, with half expecting an increase of about 50 cents while the rest expected a hike of about $1.
A trader with a second North Asian refinery said he expected Arab Heavy to rise by close to $1 a barrel as the November OSP for the crude was lower than expected to attract buyers for surplus supply, a result of maintenance at a Saudi refinery.
Saudi's Arab Heavy exports could fall as its new refineries process more of the heavy grade, although its market share is gradually being replaced by cheaper Iraqi crude.
Saudi crude OSPs are usually released around the fifth of each month, setting the trend for Iranian, Kuwaiti and Iraqi prices, and 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 officials as a matter of policy do not comment on the kingdom's monthly OSPs. --Reuters
