Asian sour crude traders and end-users welcomed Saudi Aramco’s lower-than-expected September crude oil official selling prices for Asia-bound cargoes, with some saying the OSPs were a nod to an Asian market still struggling with poor margins and demand, as well as an impending ramp-up in output from the OPEC+ group.
The producer in an early Aug. 5 notice raised the Asia-bound September OSP differential for its flagship Arab Light grade by 20 cents/b to a premium of $2/b to the Oman/Dubai average.
The September OSP differential for Arab Extra Light and Super Light was raised by a range of 10-20 cents/b, while that for Arab Medium and Heavy were kept unchanged on the month.
Expectations leading into the OSP release had been for the producer to raise Arab Light by a range of 30-80 cents/b, with Arab Extra Light and Super Light to be raised by largely the same extent, while the heavier Arab Medium and Heavy grades were expected to see slightly larger increases relative to Arab Light by about 10-20 cents/b, S&P Global Commodity Insights earlier reported.
“Better than expected,” one Asian end-user source said.
The OSPs reflected an Asian end-user market still struggling with poor refining margins and weak domestic demand. An impending hike in OPEC+ output, after the group in an Aug. 1 meeting opted to stand pat on its policy to unwind voluntary production cuts from October, was likely also a contributing factor, traders said.
Current OPEC+ plans call for eight members led by Saudi Arabia, Russia, Iraq and the UAE to begin gradually phasing out some 2.2 million b/d in voluntary production cuts between October 2024 and September 2025.
Aramco’s OSPs have been overvalued relative to the spot market for the last one year, with current conditions and the impending production increases providing an opportunity for the producer to bring its OSPs more in line with spot prices, trade sources added.
“Think Saudi [Aramco] is partly correcting some of the premium that had accumulated in their OSPs over the last one year. Now that OPEC+ exports are rising and demand is sliding, that premium has to go,” a trader said.
The current month’s October-loading cycle was bearish, with Asian refining margins still hovering at relatively weak levels despite having recovered from multiyear lows in May.
Platts, part of Commodity Insights, pegged the Dubai-Singapore cracking netback margin at $2.74/b Aug. 2, down 9 cents/b on the day and far from when it started the year in the $4-$8/b range.
Key prices and spreads in the Dubai complex have also weakened sharply in recent days, with the second-month October Dubai crude swap pegged by Platts at $75.40/b at 11 am Singapore time Aug. 5, down 3.7% from the Aug. 2 Asian close and a low not seen since Jan. 3 when it was assessed at $74.92/b, Commodity Insights data showed.
The October-November Dubai swap intermonth spread has similarly plunged, likely reflecting the prospect of increased OPEC+ supplies from October. The spread was pegged at 35 cents/b at 11 am Singapore time Aug. 5, down 15 cents/b on the week.
Source: Platts