SINGAPORE, October 31 (Reuters) – The world’s biggest oil exporter, Saudi Arabia, may reduce its December crude price for Asian buyers to multi-month lows due to ample supplies, but demand to replace Russian supplies hit by Western sanctions could limit the cuts, sources said.
The December official selling price for flagship Arab Light crude will likely decline by $1.20-1.50 a barrel to a premium over the Oman/Dubai average of between 70 cents and $1 a barrel, after holding steady at $2.20 in the previous two months, five Asia-based refining sources said in a Reuters survey.
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The December OSPs for other crude grades – Arab Extra Light, Arab Medium and Arab Heavy – could fall by $1.20-1.50 a barrel compared with November, they said.
The forecasts mirror a monthly drop in cash Dubai’s premium to swaps, which have averaged $1.12 per barrel so far this month, down $1.73 from September.
The weakness follows rising supply expectations as the Organization of the Petroleum Exporting Countries and its allies, or OPEC+, have boosted their output target by a total of more than 2.7 million barrels per day – or about 2.5% of global supply – in a series of monthly increases.
Two respondents said Saudi may opt for smaller price cuts as a result of increasing demand for spot barrels from China and India to replace Russian supply.
Some buyers from Japan and South Korea have also requested more December-loading Saudi crude, worried that near-term spot prices could rise, they added.
Strong pre-cycle nominations and expectations that Saudi Arabia will have fewer barrels to place next month as refineries come back from maintenance may result in a smaller price reduction, said Richard Jones, a crude oil analyst at Energy Aspects.
Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 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.
Below are expected Saudi prices for December (in $/bbl against the Oman/Dubai average):
Source: Reuters, trade
Reporting by Siyi Liu in Singapore; Editing by Florence Tan and Neil Fullick
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