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Saudi Arabia may raise August crude prices to record levels for Asia

A general view of Aramco tanks and oil pipes at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah/File Photo

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SINGAPORE, June 30 (Reuters) – Top oil exporter Saudi Arabia may raise light crude prices to Asia for a second consecutive month in August on the back of record distillate margins and strong spot premiums for Middle East oil this month.

The official selling price (OSP) of Saudi’s key Arab light crude could rise by about $2.4 a barrel from the previous month, according to nine refining sources polled by Reuters on June 28-29.

The price hike would push August OSP to a record high, set when May Arab Light crude reached $9.35 a barrel.

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“Refining margins are very solid and we expect demand to remain robust in the near term,” said one of the respondents.

Gasoline, diesel and jet fuel margins in Asia jumped to records in June, along with a revival in travel demand amid the easing of COVID-19 restrictions.

Spot premiums for medium-sour Oman and Dubai crude rose to their highest level since mid-March, while light sour Murban hit a record last week.

The monthly change in first- and third-month prices for the Middle East benchmark Dubai generally guides how much Saudi Arab Light’s OSP can be raised or cut.

This month, the spread has widened to an average of $2.47 a barrel in reverse – a market phase when prompt prices are higher than in futures months, indicating tight supply.

Major producers Saudi Arabia and the United Arab Emirates have flagged limited spare capacity to further increase output, but political unrest in Libya and Ecuador could further tighten oil supplies. Read More

Meanwhile, China allocated 52.7 million tonnes of fresh crude oil import quotas to its independent refiners, up 49% from the same allocation last year. This would allow Chinese buyers to take more raw materials out of an already tight global market, driving up prices further.

For other grades, respondents to a Reuters poll expect OSP to rise $0.50 to $3.00 a barrel for Arab Medium and $0.50 to $2.90 for Arab Heavy.

OSP for Arab Extra Light, which generally follows murban prices, is rising by $5.35 a barrel. IFAD Murban’s average spot premiums against Dubai quotes rose $4.38 per barrel in June from the previous month.

Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude oil to Asia.

Saudi Aramco is likely to release monthly prices after a meeting between the Organization of the Petroleum Exporting Countries and producer allies on Thursday.

Saudi Aramco officials do not comment on the kingdom’s monthly OSPs as a matter of policy.

Saudi prices in August are expected below (in $/bbl vs. Oman/Dubai average):JUL change est.AUG OSP

Arab Extra Light +7.15 +2.30/+5.35 +9.45/+12.50

Arab Light +6.50 +2.00/3.15 +8.50/+9.65

Arab Medium +6.15 +0.50/+3.00 +6.65/+9.15

Arab Heavy +4.80 +0.50/+2.90 +5.30/+7.70

Source: Reuters, Business

(This story corrects the M1/M3 spread in paragraph 8 to $2.47, not 7.58 cents)

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Reporting by Muyu Xu and Florence Tan; Edited by Kenneth Maxwell

Our Standards: Thomson Reuters Trust Principles.

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