Saudi hikes October crude prices

(Getty Images)

Top oil exporter Saudi Arabia has raised October official selling prices (OSPs) for its crude for Asian buyers and its lightest grades to Europe, but mostly lowered prices to the US.

State-owned Saudi Aramco set its flagship Arab Light crude to Asian buyers at its highest premium in more than four years, with the price hike for lighter grades beating expectations and likely to support demand for rival crudes traded on the spot market.

Aramco raised differentials to Asia for October by between 25 and 75 cents a barrel from September. Arab Light to Asia was set at a premium of $1.35 a barrel to Oman/Dubai, the highest since at least the end of 2002, Reuters data shows.

"The whole Saudi slate price increase is pretty bullish. It makes spot crude priced off Dubai look cheap," a Singapore-based crude trader said.

The biggest hike was for Arab Extra Light crude, whose OSP was set at a premium of $4.25 a barrel to the Oman/Dubai average, up 75 cents from September, topping expectations in a Reuters poll for a hike of up to 70 cents.

"The 75-cent rise in Arab Extra Light is due to an improvement in the naphtha crack in the second half of August, compared with late July. If you think that way, the hike could be called reasonable," a North Asian refiner said.

The rise also came after Abu Dhabi National Oil Company (ADNOC) increased Murban price's premium by 16 cents to $4.37 a barrel above Dubai quotes for August on the back of oilfield maintenance that would cut supplies.

Heavier grades drew support from a strong fuel oil crack.

Arab Medium and Arab Heavy are heavy sour, fuel oil-rich grades, and had been expected to strengthen on the back of a $1.28 rise in the fuel oil crack in August.

The front-month fuel oil crack rose to an average of $9.68 a barrel below Dubai swaps in August, against a $10.96 discount in July, Reuters data shows, as supplies in Asia remained limited.

Traders said the large increases would support rival grades such as Qatar's heavy sour al Shaheen.

The Saudi OSPs can influence spot sour crude demand, as high prices relative to the prevailing market may prompt refiners to limit loading volumes, though most buyers are locked in annual term liftings that leave them little room to adjust volumes.

In 2006, Saudi Arabia shipped 51.6% of its almost 7 million barrels per day of crude exports to Asia.

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