Top oil exporter Saudi Arabia may further slash the official selling prices (OSPs) for all crude grades to Asia in July, a Reuters poll showed, despite the looming OPEC+ meeting that could leave the door open to further output reduction.
State oil giant Saudi Aramco may cut the price for its flagship Arab Light crude by about $1 a barrel in July, according to seven respondents surveyed by Reuters.
That would set the July Arab Light price at about $1.55 a barrel over the Oman/Dubai average, the lowest since November 2021.
"Refining margins at Asian refineries remain weak and there are still pressures to cut operation rates," said one respondent.
Profits at a typical Singapore refinery processing Dubai crude recovered to an average of $4.27 a barrel in May, from 81 cents a barrel last month, but still far below $10.42 a barrel in January.
Spot premiums for Middle Eastern benchmark crude grades softened over the May trading cycle as refiners slowed purchases amidst bearish expectations on demand and margins.
Some Asian refineries, such as Formosa's Mailiao plant and Thailand's Bangchak, are lowering run rates. While Japan's Cosmo Oil and Eneos suffer from unit outages which could take months to resume production.
The Organization of Petroleum Exporting Countries and its allies, or OPEC+, are set to meet on June 3-4 to discuss production targets. Just two months ago, the group announced an additional output cut of 1.16 million barrels per day starting from May.
The respondents that Reuters surveyed did not expect OPEC+ to further trim production even though Saudi's energy minister issued a warning against short-sellers.
"The problem is not that there is too much oil in the market. The problem is that the prices are too high," said another respondent.
Some Asian refiners required less supplies from Saudi Aramco for June-loading cargoes due to high OSPs.
The respondents also forecasted Arab Extra Light to continue staying cheaper than Arab Light, tracking weak prices of light sour Murban.
Saudi Aramco set the June Arab Extra Light OSP lower than Arab Light, a rare move last seen in June 2021.
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 (bpd) of crude bound for Asia.
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 July 2023 (in $/bbl against the Oman/Dubai average):
