Saudi Arabia may lower July oil prices to Asia as demand weakens
SEATTLE (Oil Monster): Saudi Arabia is likely to cut its official selling prices (OSPs) for crude oil to Asia in July for a second month, a Reuters survey showed, as spot premiums eased on sluggish demand despite supply disruptions stemming from tensions in the Middle East.
The July OSP for flagship Arab Light crude may slide to a premium of $7.50 to $12.50 a barrel above the average Dubai and Oman quotes, five industry sources said in the survey, $3 to $8 a barrel lower than the OSP for June.
The expected cut follows a price decline and tepid trading in the spot market in May. The cash Dubai price's premium to swaps has averaged $8.90 a barrel so far this month, down from April's average of $13.92, Reuters data showed, with spot Oman premiums showing a similar trend.
Dubai's premium rallied to a record high of over $60 per barrel in March after the U.S.-Israeli war involving Iran disrupted supplies via the Strait of Hormuz. It then collapsed, together with global crude premiums, mainly because Chinese refiners slashed refining runs and also reduced imports, while the U.S. exported more oil and fuel to global markets to help plug the gap in supply from the Middle East.
Meanwhile, the possibility of a U.S.-Iran deal to end their war and reopen the vital Strait of Hormuz has pushed Brent crude futures below $100 per barrel this week.
A number of crude oil tankers have left the Gulf this month although energy flows via the key waterway still remained far lower than pre-war levels.
Hence, a deep price cut for Saudi oil is needed to attract demand, said one of the survey respondents.
Buyers in China have been lifting less Saudi crude in May and June given their refining losses under current high prices.
Saudi Aramco has been using the Red Sea port of Yanbu to export Arab Light crude after the war restricted shipping through the Strait of Hormuz.
The survey respondents project July OSPs for other Saudi grades to fall by the same extent. Saudi crude OSPs are usually released around the fifth day of each month. Saudi Aramco, which sets the prices, as a matter of policy does not comment on them.
Courtesy: www.reuters.com