Saudi Aramco lowers Asia crude premiums, European OSPs hiked

Quantum Commodity Intelligence – Saudi Aramco has reduced its Official Selling Price (OSP) for the flagship Arab Light crude loading in July for refiners in Asia but increased premiums to Europe to reflect the underlying weakness in Brent relative to Dubai.

Differentials for the flagship Arab Light grade for Aramco's key customer base in Asia were priced at Platts Dubai/DME Oman +$2.40/b, down from +$2.90/b in June.

The $0.50/b reduction was largely in line with expectations amid weaker spot premiums for similar grades, while Asian refining margins came under pressure last month, leading to some early-summer run cuts.

However, the OSPs also came after OPEC+ maintained the Q1/Q2 round of voluntary cuts into the third quarter, while the global crunch on supplies of sour crude has also underpinned Middle East grades.

Arab Medium was cut by $0.40/b to +$1.95/b, while Arab Heavy was also reduced $0.40/b to +$1.20/b. Arab Extra Light was down $0.60/b to +$2.20/b.

Physical

Differentials for spot Middle East medium sour barrels retreated during May, including flagship grades Oman and Upper Zakum dipping to Dubai swaps +$1.50-$1.60/b for July-loading cargoes in the final week of May, almost a dollar lower from spot premiums in the final week of April.

Market structure also crunched with the key M1/M3 (Jul24/Sep24) spread, which is used in OSP calculations, narrowing to around +$1.60/b in late May versus more than +$2/b in April.

The Quantum average price for Dubai was $84.04/b on July-loading barrels versus $89.17/b on June-loading crude, a loss of 5.75%, as sluggish refining margins and the eroding geopolitical risk premium weighed on sentiment.

Brent/Dubai averaged -$0.87/b as the spread continued to blow out from April's -$0.25/b.

For Northwest Europe, the Arab Light OSP was set +$3.10/b over ICE Brent futures, up from +$2.10/b while Medium was hiked from + $1.10/b to +$2.30/b. Both grades were increased to reflect the relative weakness in Brent compared to sour barrels.

Arab Light for April to the US Gulf was kept steady at +$4.75/b over ASCI (Argus Sour Crude Index), while Medium was at +$5.45/b and Heavy at +$5.10/b, respectively, both unchanged on the month.