General
view of Aramco's oil field in the Empty Quarter, Shaybah, Saudi Arabia,
January 12, 2024. REUTERS/Hamad I Mohammed/File Photo Purchase Licensing Rights
Saudi Arabia may hike March oil prices for Asia to highest in over a year
SINGAPORE,
Jan 27 (Reuters) - Top oil exporter Saudi Arabia may raise crude prices
for Asian buyers in March to their highest in more than a year after
benchmark prices spiked on higher demand from China and India as U.S.
sanctions disrupted Russian supply, traders said on Monday.
The
March official selling price (OSP) for flagship Arab Light crude may
jump by $2-$2.50 a barrel from February, three of four Asian refining
sources said in a Reuters survey. The remaining source expects a
$3-a-barrel rise across all grades.
That
suggests the March Arab Light price could climb to a premium of at
least $3.50 a barrel to the average of the benchmark Oman and Dubai
prices, the highest since January 2024, from February's premium of $1.50 a barrel, Reuters data showed.
A
$2-a-barrel hike in the premium would also mark the biggest monthly
increase since the OSPs were set for August 2022, the data showed.
The
March OSPs for the country's other grades - Arab Extra Light, Arab
Medium and Arab Heavy - are expected to increase by at least $1.80, the
survey showed.
These
forecasts generally tracked the change in the market structure for the
first- and third-month Dubai prices. So far in January, the
backwardation in the Dubai market has widened by $2.05 a barrel from the
previous month, Reuters data showed.
Backwardation
is the market structure when prompt prices for a commodity are higher
than for future months, indicating tight supply or higher demand.
However,
gains in future prices may be constrained given weak demand and thin
margins among Asian refiners, some of the respondents said.
The administration of former U.S. President Joe Biden announced on Jan. 10 further sanctions targeting Russian producers, tankers and insurers, disrupting supply from the world's No. 2 producer and tightening ship availability.
That
prompted Chinese and Indian refiners to seek replacement cargoes and
pushed up spot premiums for Oman and Dubai to their highest since
November 2022.
OPEC+, which pumps about half the world's oil, agreed in early December to push back
the start of oil output rises by three months until April and extended
the full unwinding of cuts by a year until the end of 2026. The group
will meet on Feb. 3 amid calls by U.S. President Donald Trump to reduce oil prices.
Saudi crude OSPs are usually released around the fifth of each month,
and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about
9 million barrels per day of crude bound for Asia.
State
oil giant Saudi Aramco sets its crude prices based on recommendations
from customers and after calculating the change in the value of its oil
over the past month, based on yields and product prices.
Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.
Below are expected Saudi prices for March (in $/bbl against the Oman/Dubai average):