Singapore: Saudi Arabia has increased the September prices for crude it sells to Asia by less than forecast, traders said on Thursday, as the world’s biggest oil exporter defends its market share amid slowing demand.
Refining profits have fallen to the lowest level of the year in Asia, prompting refiners to cut output even as the Organization of the Petroleum Exporting Countries (Opec) pumped at historic highs in July, helping to depress global oil prices to multi-month lows.
Saudi Arabia maintained output near record levels in July as the group showed no sign of wavering in its focus on defending market share instead of prices.
Asia is the only region where Saudi Arabia raised oil prices in September.
“The region’s refiners may rue the fact that term crude prices will rise as they roll over or fall elsewhere, but in fact the Asian increases were likely limited by developing weakness in margins and spot crude differentials,” analysts at Vienna-based consultancy JBC Energy said in a note.
State-run oil firm Saudi Aramco was expected to raise official selling prices (OSPs) for most grades by about $1 a barrel in September from the previous month due to a stronger Dubai benchmark, according to a Reuters survey on August 3.
Sharper hikes
But the price hike for flagship grade Arab Light was at the low end of market expectations, while price gains for Arab Medium and Heavy were half of what had been expected.
Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.
A trader with an Asian refiner said sharper hikes in the Saudi OSPs could have prompted refiners to switch to cheaper crude from other producers.
“The Saudis are trying not to erode their [market] share with a high OSP,” the trader said.
Still, the Saudi price hikes put more pressure on Asian refiners struggling with low margins.
Refiners in “Europe and US are enjoying healthy margins and running at full rates but Asian refiners are getting into more trouble after the OSP hike,” a trader with a North Asian refiner said.
“Asia is suffering from high crude costs and very low product cracks,” he said.
