Reuters reported that oil sources said on Monday that Saudi Arabia, the world’s largest oil exporter, is expected to cut prices for most of the crude grades it sells to Asia in October after the Middle East’s benchmark Dubai crude fell last month.
The official selling price (OSP) for the main Arab Light crude grade for October is expected to fall by 50 to 70 cents a barrel, three of five refining sources in a Reuters survey said, tracking a similar trend for Dubai margins last month.
Such a price cut would also reflect weak refining margins, particularly in China where slowing manufacturing and real estate sectors are weighing on fuel demand, the sources added.
“Margins are bad now overall and worse in China,” one of the sources said, adding that September, usually the best month for oil demand, could be disappointing this year.
OPEC+ supplies are also set to rise from October when eight members of the group increase output by 180,000 barrels per day during the month as part of a plan to start gradually removing the latest tranche of 2.2 million barrels per day of production cuts while maintaining further reductions until the end of 2025.
However, two other survey participants expected the official selling price for Arab Light crude for October to remain little changed, with one saying that was partly due to the improvement in the Dubai benchmark during the final trading week last month.
For the heavier crudes, Arab Medium and Arab Heavy, three of the five participants expected October prices to be cut by less than 50 cents, supported by strong demand for fuel oil, while the other two expected price cuts ranging from 60 to 80 cents per barrel.
Official selling prices for Saudi crude are usually released around the fifth day of each month and set the tone for Iranian, Kuwaiti and Iraqi prices, affecting more than 9 million barrels per day of crude oil heading to Asia.
Saudi Aramco sets its crude prices based on customer recommendations and after calculating the change in the value of its oil over the previous month based on revenues and product prices.
