SINGAPORE- Top oil exporter Saudi Arabia may raise prices of light crude grades to Asia for the second straight month in August on the back of record distillate margins and strong spot premiums for Middle Eastern oil this month.
The official selling price (OSP) for Saudi’s flagship Arab Light crude could rise by about $2.4 a barrel from the previous month, according to nine refining sources surveyed by Reuters on June 28-29.
Oil prices edged higher on Thursday after dipping in early Asian trade, as concerns about global supply tightness outweighed a build in US gasoline and distillate inventories.
Brent crude futures for September, the more actively traded contract, rose 63 cents, or 0.6 percent, to $113.08 a barrel. The less liquidly traded August contract, which expires Thursday, was at $116.08, down 18 cents, or 0.2 percent.
US West Texas Intermediate (WTI) crude futures climbed 49 cents, or 0.5 percent, to $110.27.
“Crude oil pushed higher in early trading after a bullish inventory… The drawdown was driven by refiners increasing their throughput amid historically high refining margins,” ANZ analysts said in a note.
Crude inventories fell by 2.8 million barrels in the week to June 24, far exceeding analysts’ expectations in a Reuters poll for a 569,000 barrel drop, US Energy Information Administration data showed, even as US gasoline and distillate stockpiles climbed.
Fuel stocks rose as refiners ramped up activity, operating at 95 percent of capacity, the highest for this time of year in four years.
But further disruptions to supply supported prices, the ANZ analysts said, amid the suspension of Libyan shipments from two key eastern ports, while Ecuador saw output fall due to ongoing protests.
The price hike would drive the August OSP close to record levels, set when May Arab Light crude reached $9.35 a barrel.
“Refining margins are very solid and we expect demand to stay robust in the near term,” said one of the respondents.
Margins for gasoline, diesel and jet fuel in Asia leapt to records in June alongside a revival of travel demand amid the easing of COVID-19 restrictions.
Spot premiums of medium-sour Oman and Dubai crude have climbed to their highest since mid-March, while light sour Murban soared to a record last week.
The monthly change in first- and third-month price spread for Middle East benchmark Dubai typically guides how much Saudi might raise or cut Arab Light’s OSP.
This month, the spread widened by an average of $2.47 a barrel in backwardation – a market phase when prompt prices are higher than those in future months, indicating tight supply. – Reuters
