Saudi Aramco lowers Asia crude premiums, hikes European OSPs

Quantum Commodity Intelligence – Saudi Aramco has cut its Official Selling Price (OSP) for the flagship Arab Light crude loading in August for a second month but further hiked premiums to Europe.

Differentials for the flagship Arab Light grade for Aramco's key customer base in Asia were priced at Platts Dubai/DME Oman +$1.80/b, down from +$2.40/b in July.

The $0.60/b reduction was largely in line with expectations amid weaker spot premiums for similar grades, while Asian refining margins were again under pressure in the first half of June before improvements at the back end of the month.

Arab Medium was cut by $0.70/b to +$1.25/b, while Arab Heavy was also reduced by $0.70/b to +$0.50/b. Arab Extra Light was down $0.60/b to +$1.60/b.

The reductions came after differentials for spot Middle East medium sour barrels retreated during June, including flagship tradeable grades Oman and Upper Zakum dipping to below Dubai swaps +$1/b for August-loading cargoes in the final week of the month.

Structure

Likewise, market structure also crunched with the key M1/M3 (Aug24/Oct24) spread, which is used in OSP calculations, narrowing to below +$1/b in late June compared to around +$1.60/b in the preceding month.

The Quantum average price for Dubai was $82.55/b on August-loading barrels versus $84.04/b on July-loading crude, although markets staged a strong recovery over the course of the month after the sharp price retreat in the wake of the early-June OPEC meeting.

Sep24 Brent/Dubai averaged +$0.19/b as the spread flipped back into positive territory on a strong performance from the North Sea light crude marker.

For Northwest Europe Arab Light OSP was set at +$4/b over ICE Brent futures, up from +$3.10/b while Medium was hiked from + $2.30/b to +$3.20/b, both grades sharply increased for a third consecutive month.

Analysts noted that Arab Light OSP to NWE has now increased from just $0.30/b for May to +$4/b in August, which reflects the tightness of medium sour crude availability in Europe, but has made Saudi barrels potentially uncompetitive in the region.

Arab Light for August to the US Gulf was up $0.10/b at +$4.85/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.