Saudi Arabia is expected to hike prices to Asia
Saudi Arabia likely to raise February crude prices to Asia
SINGAPORE, December 31, 2015
Top oil exporter Saudi Arabia is expected to raise prices for most crude grades it sells to Asia in February on a stronger Dubai benchmark and robust naphtha margins, trade sources said.
The official selling price (OSP) for Arab Extra Light is expected to see the biggest hike for the month at about 70 cents a barrel as it yields more of the highly profitable naphtha, a survey of four Asian refiners showed.
Refiners' profits for producing a tonne of naphtha from Brent crude have been running on average this month at their highest since July 2014.
Saudi flagship Arab Light crude prices could rise by 15-60 cents a barrel, the survey showed. Two refiners placed their estimates closer to a hike of 50 cents a barrel after Dubai's contango structure in the first and third month narrowed by the same amount in December from last month.
"If you just look at the structure, it is very obvious for prices to increase," said a trader with a North Asian refiner.
Prompt supplies are cheaper than those in future months in a contango market.
The refiners expect smaller price hikes for Arab Medium and Heavy crudes as competing supplies from other Gulf producers such as Iraq remained ample, while Iran gets ready to ramp up exports once sanctions 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.
Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs. -- Reuters
