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Saudi Aramco Aug crude OSP hike beats market expectations, supply worries linger
7/7/2021 12:00:00 AM

Saudi Aramco raised its official selling prices for August-loading term crude for Asian buyers, in line with the rise in the Middle East sour complex over last month but at the higher end of market expectations, sources told S&P Global Platts July 7.

Saudi Aramco raised prices for all of its Asia-bound crude light, medium and heavy grades in August by 80 cents/b while increasing the price for its Arab Super Light grade by $1/b.
The sharp hike in prices match the increase in the cash Dubai premium over same-month Dubai futures spread -- understood to be a key element in OSP calculations -- which increased by 74 cents/b in June from $1.14/b in May, Platts data showed.
"This is the upper limit [for the hike]. August loading should be tight," said a crude oil trader in Singapore.
While a hike in OSPs was widely expected, tighter crude supplies remain a concern for refiners in Asia as key economies in the region emerge from the pandemic with an increased thirst for oil and products.
The OPEC+ alliance looked likely to gradually inject more crude into the market but with Saudi Arabia and the UAE locking horns on production baselines, the impasse has further dented hopes for buyers, traders said.
As prices for Middle East grades turn expensive, refiners in Asia-Pacific also see lesser flows of arbitrage barrels from the West into the region due to a widening Brent/Dubai spread, sources said.
On July 6, the September Brent/Dubai Exchange of Futures for Swaps was assessed at a premium of $4.36/b, the highest since April 27, 2018 when it was assessed at a premium of $4.68/b, S&P Global Platts data showed.
A widening EFS spread makes crude priced against Dubai more economically attractive for Asian refiners compared to Brent-linked ones.
"The arbitrage [window] is still shut. Doesn't make sense to Japan [to buy arbitrage crude] at least," said another crude oil trader in Singapore.
Among the grades, lighter crude grades could still see more interest from buyers in the spot market compared to medium and heavier grades, sources told Platts.
Last week, Abu Dhabi National Oil Co. issued OSPs, with the price of its flagship Murban crude set on the monthly average of IFAD Murban contract in June.
The average premium of the IFAD Murban contract in June to front-month Dubai was $2.65/b, a shade lower than the Arab Extra Light OSP at $2.70/b.
Market participants said that product cracks for some lighter distillates have been better which could support demand for some Middle Eastern lighter crudes.
"The lights [crude grades] will be supportive like Murban and Das Blend," said the second trader in Singapore. "Mogas and naphtha cracks are good and Murban and Das Blend are perfect to produce gasoline."
In July so far, second-month naphtha cracks versus Dubai crude swaps average at a premium of $1.36/b, compared to a discount of 90 cents/b for whole of June while gasoline cracks average at $10.17/b up from $8.84/b for the same period, Platts data showed.
Source: SP Global