Saudi Arabia, the leading oil exporter, is contemplating raising prices for most of its crude grades sold to Asia in June. This potential increase would mark the highest levels in five months, following the strengthening of Middle East benchmarks this month, a trade source told Reuters. The June official selling price (OSP) for Arab Light crude might see a surge of 70 to 90 cents, nearing a $3 per barrel premium compared to the average of Dubai and Oman quotes, according to a Reuters survey of seven refining sources. This hike would represent the highest level since January. The potential price adjustments align with a broader backwardation for the first and third month for Platts Dubai and DME Oman, standing at 83 cents and 96 cents, respectively, so far this month compared to the previous month's average, according to Reuters data. This indicates that prompt prices are higher than those in the coming months, signaling tight supply. The majority of respondents anticipate that June OSPs for Arab Medium and Arab Heavy will also increase, mirroring Arab Light, supported by tight supply amid OPEC+ cuts and robust fuel oil margins. Abu Dhabi National Oil Co (ADNOC) has commenced processing Upper Zakum crude at its revamped Ruwais refinery, leading to reduced exports of the medium sour grade. However, Mexico's Pemex is reverting crude export cuts of at least 330,000 barrels per day (bpd) planned for May, owing to lower-than-expected oil demand from its domestic refineries, which has partially alleviated tight supply. The shift in ADNOC's refinery feedstock has resulted in record Murban crude exports in April of 1.65 million barrels per day, as indicated by Kpler data, consequently dampening light sour crude prices. Respondents to the Reuters survey anticipate that strong light crude supply and weak naphtha margins will likely restrain price increases for Arab Extra Light to 30-50 cents in June, trailing gains made by other Saudi grades. Saudi crude OSPs are typically disclosed around the fifth of each month, setting the trend for Iranian, Kuwaiti, and Iraqi prices, impacting approximately 9 million barrels per day (bpd) of crude destined for Asia. State producer Saudi Aramco determines its crude prices based on customer recommendations and calculations of the change in the value of its oil over the preceding month, considering yields and product prices. As a matter of policy, Saudi Aramco officials refrain from commenting on the kingdom's monthly OSPs.
