Saudi Arabia to raise October crude prices to Asia

SINGAPORE: Top oil exporter Saudi Arabia is expected to raise prices for crude it sells to Asia in October, tracking the strength in the Middle East price benchmark Dubai and a recovery in Asia's refining margins.

The official selling price (OSP) of Saudi crude, released around the fifth of each month, sets the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of oil bound for Asia.

For October, Saudi Aramco could raise the OSP for flagship Arab Light by 50 cents to $1 a barrel, a Reuters survey of six refiners and traders showed.

This tracks a 52-cent gain in the contango spread between first and third month Dubai prices in August from July, traders said. Prompt prices are lower than those in future months in a contango market.

The price spread between Oman and Dubai markers has also narrowed in August, which, together with a recovery in margins for producing gasoil and gasoline, is providing impetus for Saudi Aramco to raise prices.

But this does not indicate a shift in Saudi's focus away from boosting production and market share, traders said.

A hike of more than 50 cents "goes against their (Saudi) strategy of securing more market share", a trader with a North Asian refiner said.

Saudi Arabia could boost its crude supplies in August to a new record, overtaking Russia, the world's top oil producer, and contributing to a record OPEC output in the same month.

"Saudi continues to emphasize production over price and as far as the two other OPEC major producers, Iraq and Iran, are concerned, they too are seeking to expand production capacity," BNP Paribas Global Head of Commodity Markets Strategy Harry Tchilinguirian said on the Thomson Reuters Global Oil Forum.

"We see Saudi continuing the fight for market share, and this was reflected in repeated discounting of OSPs in a tit-for-tat process with Iran that was basically doing the same thing."

Saudi Aramco had slashed the September price for its Arab Light crude oil for Asian customers by $1.30, the largest cut for the flagship grade in nearly a year.

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.

The company as a matter of policy does not comment on the kingdom's monthly OSPs.