Top oil exporter Saudi Arabia may lower its crude prices for Asian buyers in May to a three-month low, tracking the steep declines in benchmark prices this month, traders said.
The May official selling price (OSP) for flagship Arab Light crude may decline by $1.80 to $2 a barrel from April, four Asian refining sources said in a Reuters survey.
That suggests that the May Arab Light price could come at a premium of about $1.50 to $1.70 a barrel to the average of benchmark Oman and Dubai prices, down from $3.50 for April and the lowest since the February price.
The producer cut prices for April by 40 cents after consecutively hiking it for two months, as OPEC+ decided to proceed with a planned April output increase of 138,000 barrels per day, its first increase since 2022.
OPEC+, which pumps over 40% of the world's oil, will likely stick to its plan to raise oil output for a second consecutive month in May, sources have told Reuters.
May OSPs for Saudi's other grades - Arab Extra Light and Arab Medium - are expected to decrease by at least $1.85, the survey showed.
Two respondents expected those for Arab Heavy may fall by $1.80, adding that the latest U.S. threat of 25% tariffs on Venezuelan oil-buying countries might lend some support to the grade.
The forecasts generally tracked the change in market structure for first- and third-month Dubai prices. Until March 27, the Dubai backwardation narrowed by $1.99 a barrel from the average of the previous month, Reuters data showed.
Backwardation is a market structure when prompt prices for a commodity are higher than for future months, indicating tight supply or higher demand.
The Middle Eastern market also weakened due to more Russian supply returning to Asia since March.
U.S. sanctions targeting Russia's oil trade in January led buyers in China and India to find alternative supplies from the Middle East and other regions. But Russian exports to China and India largely recovered as non-sanctioned tankers, drawn by lucrative payoffs, joined the trade.
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 May (in $/bbl against the Oman/Dubai average):
Source: Reuters, trade
