Asian refiners have pressured Saudi Arabia to cut its crude oil’s official selling prices (OSP) for the third month in a row in May. The urge rose as Middle East benchmarks and refining margins slumped due to high supplies and lower demand on account of the coronavirus.
Two sources said that the kingdom initially planned to announce the prices by Thursday but decided to delay to April 5. The OSP sets the price trends for Iranian, Kuwaiti, and Iraqi crudes, affecting higher than 12 million bpd of crude to Asia.
A Reuters survey oversaw Saudi Aramco cut May OSP for Arab Light grade by USD1-6/barrel at an average of USD3.67/barrel cut.
One of the respondents commented that it would be impossible for Saudi not to slash prices unless the kingdom no longer wants a price war and is changing to reducing production.
Another factor behind the pledged cut is the wide discount of Saudi oil compared to competing grades including Russia’s Urals crude and US Mars crude.
Regarding the grade, respondents expected prices for Saudi’s lighter grades to be down more than the heavier grades as margins for naphtha and gasoline are weak, combined with the ample supply of global light crude.
May-loading light sour grades from Abu Dhabi’s Murban and Das grades have traded at deep discounts to their OSPs in the spot market.
Saudi Aramco sets its crude prices after assessing recommendations from customers and calculating the change in the value of its oil in the past month, based on yields and product prices.
