On the assumption that demand would go up and Chinese refineries will increase output in response to the issue of new product export quotas, the world’s top oil exporter Saudi Arabia may hike prices for the majority of crude grades it delivers to Asia in November.
The median response from five refining sources on September 29 and 30 indicates that the official selling prices (OSP) for the company’s flagship Arab Light oil may increase by 25 cents per barrel in November.
According to the current market structure, oil demand is anticipated to increase, according to one responder.
Last month’s trade saw a widening of the backwardation in the Dubai market structure, suggesting an increase in near-term demand for crude.
In September, the premium for Dubai’s front-month oil over the cost of the third month increased to $5.36 per barrel from $5.07 in August.
The market anticipates China, the largest crude importer in the world, to raise purchases as a result of Beijing’s recent announcement of new export quotas for refined products, which total 15 million tonnes.
This could entice Chinese refineries to increase their crude purchases in order to increase fuel production.
With China’s new export quotas, the refining margins for gasoline and diesel fell since a glut of refined goods would drive down the pricing of the products.
Another respondent stated, “That’s why we predict the official pricing for lighter crude grades will only experience a slight boost.”
The refining margins, also known as cracks, for fuel oil are performing better than the light- and middle-distillate products, according to the respondents polled by Reuters, who estimates that the price increase for Arab Medium and Arab Heavy will be more than Arab Light.
Low-sulfur fuel oil export quotas from China were set at 1.75 million tonnes, as opposed to 13.25 million tonnes for other products in the most recent round.
At their monthly meeting this week, OPEC+ will discuss reducing oil production by more than a million barrels per day (BPD), which would be their largest action to address the oil market’s downturn since the COVID-19 epidemic.
Oil rises 3% as OPEC+ considers the largest supply reduction since 2020.
More than 9 million barrels per day (BPD) of crude oil are headed for Asia, and Saudi Arabian oil price outlooks (OSPs), which are released around the fifth of every month, set the tone for Iranian, Kuwaiti, and Iraqi pricing.
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.
