Increasing supply and weaker Middle Eastern benchmark prices will likely prompt Saudi Arabia to cut the official selling prices for its crude loading for Asia in December, but a scramble for non-Russian supply in India and China could limit the price reductions.
Saudi Arabia, the world’s to crude exporter, is expected to cut the official selling price (OSP) of its flagship Arab Light crude for Asia for December by between $1.20 and $1.50 per barrel, according to a Reuters survey of Asian refining sources published on Friday. This would reduce the Arab Light premium over the Oman/Dubai benchmark to a multi-month low of between $0.70 and $1.00 per barrel, compared to a premium of $2.20 a barrel for October and November.
The other Saudi grades are also expected to see cuts in December.
Early in October, Saudi Arabia left the OSP of its crude oil selling in Asia in November unchanged from the October prices as OPEC+ continues to lift production amid a market concerned about an imminent oversupply.
Saudi Arabia typically announces around the fifth of each month its crude pricing for the following month and doesn’t comment on price changes. It also sets the tone for the pricing of the other major oil producers in the Middle East, influencing the pricing policy of about 9 million barrels per day (bpd) of exports from the Arab Gulf region.
The Saudi pricing will be announced after this weekend’s OPEC+ meeting, which is expected to agree on another small increase in total quota for the producers who have been unwinding their production cuts since April.
Indications are that the OPEC+ producers are leaning toward another slight increase in total quota, probably by another 137,000 bpd, sources with knowledge of the talks within the alliance told Reuters on Monday.
The Saudi price cut for its Asian exports in December could be lower than expected amid uncertainty about Russian supply to India and China following the U.S. sanctions on the two biggest Russian oil companies, Rosneft and Lukoil.
By Charles Kennedy for Oilprice.com
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