Traders Expect Saudi Arabia to Raise Apr Crude Oil OSP for Asian Buyers

Saudi Arabia is widely expected to raise its official selling price for crude oil loading in April for Asian buyers in line with a stronger Dubai market structure as improving margins for refiners underpin spot differentials, traders said Monday.

"Definitely Saudi Arabia will revise higher as the April market was done at stronger levels though [there are] few cargoes still [out] there," said a trader with a regional refiner. "[The] prompt margin is still good and cracks are also better."

Traders polled by Platts forecast an increase in the Arab Light OSP by 70 cents/barrel to $1.30/b, with lighter grades expected to see a relatively larger gain because of strong naphtha cracks.

"I think Arab Extra Light [would be] up by $1/b at least; Arab Light will be slightly smaller but maybe $1/b makes sense," said another regional trader.

The contango in the Dubai crude market structure shrunk $1.29/b month on month over February, Platts data showed.

For March, the Arab Light OSP differential was set at a $2.30/b discount to the average of Oman and Dubai, down 90 cents/b on month. Aramco has been lowering its prices steadily since June as large producers scramble to hold on to market share following a roughly 50% drop in benchmark crude prices.

While Asia is heading into its seasonal refinery turnaround period, sentiment in the Middle East market has been supported by strong product cracks that have pushed up spot differentials for Middle East cargoes in recent weeks.

Most Middle East sour grades traded stronger last month, fueling expectations OSPs in general would be higher in the next cycle.

Saudi Aramco is expected to announce its April OSPs later this week.

(platts.com, 2 March, 2015)