Expressing concerns over a steep hike in formula prices for July, Indian state-controlled refiners have written to Saudi Arabia and other Middle East crude suppliers. For buyers in Asia-Pacific, Saudi Aramco set its July official prices (OSPs) at a four-month high.
Supply cuts and price increases may prompt Indian refiners to turn to the spot market despite signs of tightening availability. In line with June shipments, Saudi Arabia will cut its basic term allocations by 10-20 percent in July.
Indian refiners had expected Saudi Arabia to price its light and medium grades in July in line with April levels, at discounts to the average of monthly Oman and Dubai crude assessments. Compared with a $7.30/bl discount for May and $3.10/bl discount in April, Aramco set the discount for its key June-loading Arab Light crude to Asia-Pacific at $5.90/bl to Oman/Dubai.
The $5.60-7.30/bl increase in July levels over June was a disappointment and led Indian refiners to officially complain. When setting prices, the UAE, Iraq and Kuwait will follow the Saudi lead.
