Top oil exporter Saudi Arabia will probably raise its official selling prices for the lighter grades of crude that it sells to Asia in October because of a stronger Dubai market and narrowing product cracks, a Reuters poll showed on Monday.
The producer could raise the October official selling prices (OSPs) for Arab Light and Arab Extra Light by 50 cents a barrel from the previous month, according to the median estimates by five traders and refiners.
The OSPs for Arab Medium and Arab Heavy could rise by 10-20 cents a barrel, the poll showed.
“The overall market direction is bullish, so I expect them to raise their prices,” said a trader at a refiner. “Product cracks are supportive, especially for the lighter grades, so they may raise them more.”
Gasoil cracks improved, with the premium rising to over $21 a barrel at one point during the month, the highest since October 2011. Naphtha cracks also improved, with the discount narrowing to about $6.6 a barrel from $10.8 per barrel at the start of the month.
Complex refinery margins have narrowed slightly to $9.46 a barrel last week, from $10.62 at the beginning of the month.
Heavier grades may be raised by a smaller margin or kept unchanged, because of continuing weakness in fuel oil cracks, traders said. The discount on fuel oil cracks has widened to $5.26 a barrel from $3.47 a barrel at the beginning of August.
Still, some traders were of the view that Saudi Arabia may not raise prices, saying the improvement in cracks was not an indication of demand but of product shortages because of refinery outages.
Refineries in Japan and Thailand suffered unplanned outages in July, and some of them resumed operations in August, leading to an unexpected drop in production.
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.
State oil giant 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.