US shale oil producers can take advantage to enlarge their shares in Asian markets after Saudi Aramco hiked its July Official Selling Prices (OSPs) across all grades to Asia, according to Clyde Russell, a Commodities and Energy Columnist at Reuters. Benchmark Arab Light crude for July-loading cargoes to Asia was jacked up by $6.10/barrel from June, above the $3.80/barrel expected by Asian refiners in a Reuters poll.
With such higher prices, Chinese refiners now have an incentive to take less Middle Eastern crude, particularly those originated from Saudi Arabia. On Monday, the price of US WTI crude physically delivered in Houston was assessed at $39.39/barrel, lower than Dubai swaps of $40.81/barrel.
WTI crude is a light oil comparable to Saudi Aramco’s Arab Extra Light grade which after the OSP hike, sees prices at a 20 cents/barrel premium over the Oman/Dubai July average. This means that US WTI cargoes can be secured at lower prices compared to similar grades from the Middle East despite higher shipping costs.
In addition, China agreed to boost purchases of US energy in the phase-one trade deal signed in January. This can provide Chinese refiners with more incentive to boost imports of American oil.
