Gas is flared near the Khurais oilfield, about 160 km from Riyadh. Saudi Arabia cut its March OSPs by more than a dollar in anticipation of weak demand. Image Credit: Reuters

Singapore: Top oil exporter Saudi Arabia may lower official selling prices in April for all crude grades for its Asian buyers after the Dubai crude and DME Oman prices weakened.

The kingdom is considering reducing the OSPs for Arab Extra Light and Arab Light by 40 to 60 cents (Dh1.47-Dh2.20) per barrel, while Arab Medium and Arab Heavy may be cut by 80 to 90 cents, according to the median of estimates from four traders and refiners.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting some 7 million barrels per day (bpd) of crude bound for Asia.

Low demand because of refinery turnarounds pulled down not only the Dubai cash market, which dropped by nearly $4 in April trading, but also narrowed the differentials in the spot market.

DME Oman’s differential to Dubai also steadily weakened during the month to trade nearly flat to slightly lower from a 50 to 70 cent per barrel premium at the start of the month.

“As turnaround activity continues in May, Saudi (Aramco) will continue to make its OSPs attractive if it wants to maintain its market share,” a dealer at a trading house said. “The extent of the cuts will be smaller than last month, though.”

Saudi had cut its March OSPs by more than a dollar across grades in anticipation of weak demand.

A few refineries in China and Japan will stay shut through May for planned maintenance, while some will resume by the end of April.

Complex refinery margins increased during February, to $8.50 per barrel to nearly $12 per barrel this week from less than $8 a month earlier.

Product cracks, the profit or loss made by a refinery by processing crude into specific products, for fuel oil, weakened during the month, which may prompt Saudi Arabia to further cut the price of its heavier grades.

Saudi Aramco, the world’s biggest crude exporter, sets its crude prices based on recommendations from customers and calculations in the changing value of its oil over the previous month, considering yields and product prices.