Saudis reduce December light crude prices to Asia

Tokyo, Singapore: Saudi Arabia has trimmed the price of its December lighter crude sales to Asia while raising the differential on heavy grades, disappointing some refiners who had hoped for lower prices, traders said yesterday.

Saudi Aramco cut the December official selling prices (OSPs) of benchmark Arab Light by 15 cents, while leaving heavier Arab Medium unchanged and raising its heaviest grade, Arab Heavy, by 20 cents.

The changes further narrow the spread between light and heavy grades, which reached a record-wide gap several months ago.

"The changes are not too far away (from my expectations). The lower Arab Light reflects a weaker gas oil crack and Arab Heavy seems higher on the stable fuel oil crack," a trader with a refiner said.

The cut in OSPs signals Saudi's recognition that crude oil demand in Asia remains weak, traders said, despite its move to cut November exports to the region by up to 8 percent from term volumes, or around 280,000 bpd, as part of Opec's curbs.

But the price cuts fell short of some expectations. A Reuters poll had indicated traders were anticipated as much as a 40-cent cut in lighter grades, while heavier grades were expected to remain flat or receive a modest reduction.

Although higher prices often prompt refiners to minimise the volume they lift from Saudi Arabia, the Opec-inspired cuts are likely to limit their flexibility, traders said, offering little lift to depressed spot crude markets.

Saudi Arabia cut the December price of Arab Light to a discount of 10 cents a barrel to the Oman/Dubai average, compared with a premium of 5 cents for November, lifters said.

The top world exporter kept the Arab Medium crude OSP at the average minus $2.70 a barrel for December, unchanged from November, while it raised the price of Arab Heavy crude to a $5.30 discount for December from a $5.50 discount for November.

Although a recovery in the front-month fuel oil crack from record-lows in September to around an $11-14 discount to Dubai swaps last month tempered expectations for a cut, the rise in Arab Heavy was not well received.