Largest oil exporter Saudi Arabia is expected to make profound cuts to its monthly official selling prices (OSP) to Asia since 2012, following decreases in Middle East benchmarks and weak refining margins as the coronavirus infection has slashed demand.
Saudi crude value cuts for a second consecutive month demonstrating that Asia, the world’s fastest-growing demand center for oil, is overwhelmed with provisions after the spreading of coronavirus prompting cuts at refineries in China. Six refiners surveyed by Reuters expect the April OSP for Asia for Arab Light crude to fall by $2.04 a barrel at least. That would be the largest reduction for the Saudi main grade since mid-2012, as per Refinitiv Eikon information.
In February, the Dubai benchmark market structure moved into a contango, where prompt costs are lower than the ones in future months which show lower demand, from a reduction in January, when prompt costs are higher than later prices, showing more demand. Asian refineries will likewise start shutdowns in April for spring maintenance further hosing crude demand.
Light crude grades such as Murban and Das from UAE have exchanged at discounts of 90 cents to $1.20 a barrel beneath their OSP market highlighting further cuts for Saudi lighter grades, two respondents said. The April OSP for Arab Extra Light rough was expected to fall by $1.90 to $3 a barrel, the survey indicated. Middle distillates margins have reduced due to a reduction in industrial and airline industries after China shut factories and countries forced travel limitations to forestall the coronavirus from spreading.
“Stockpiles (in Asia) are high for both crude and refined products. It would take a few months to digest it,” one of the respondents said. The respondents anticipated Arab Medium and Arab Heavy crude grades to be sliced by $1 to $3 a barrel in April.
State oil goliath Saudi Aramco sets its crude costs dependent on recommendations from clients and after gauging the change in the estimation of its oil over the previous month, view of yields and product costs.