Surprise Saudi oil price hike for Asia may be last for months: Clyde Russell
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Saudi Aramco probably won few friends among Asian refiners when it defied expectations and raised the official selling prices of its crude oil grades for February cargoes.
The increase was the third in a row of increases that have contributed to a cut in refining margins in region, which takes about two-thirds of the crude shipped by Aramco, the world's biggest oil exporter.
If there is a silver lining to the cloud of higher prices for refiners, it's that OSPs could be lowered from March, assuming that current market trends continue.
Aramco increased the premium on its main Arab Light grade to $3.45 a barrel over regional benchmark Oman/Dubai crude for February, up from $3.30 in January.
The heavy grade was raised to a discount of $1.10 a barrel in February from January's bigger $1.40 discount.
Both price increases were outside the expectations of traders surveyed by Reuters before the Jan. 4 announcement, with a medium forecast of a rise of 10 cents a barrel for Arab Light, and a 25-cent widening in the discount of Arab Heavy.
Aramco doesn't disclose its thinking for movements in OSPs, but one possible reason the prices were raised when the market was expecting a reduction is that Dubai crude's discount to Brent widened considerably in December.
As the Saudis are believed to try and keep prices more or less the same for customers in various regions, a widening of the Dubai-Brent exchange for swaps & would seem to justify increasing the OSPs for Asia while cutting them slightly for Europe. Brent was $5.20 a barrel higher than Dubai on Jan. 7, which represents a gain of 37 percent since the $3.83 on Dec. 7 last year.
But the premium has narrowed from $5.40 a barrel on Jan. 2, a trend that could continue, given the adequate supplies of light crude globally and economic weakness in Europe, a major consuming centre.