Refiners Expect Saudi Arabia To Raise Oil Prices For Asia In November

Saudi Arabia may raise the prices for its crude export grades to Asia next month in response to signs of recovering crude demand in one of its biggest markets and the new batch of fuel export quotas issued by Beijing.

Energy consultancy FGE said last week that Chinese refiners had been issued fuel quotas to the tune of 13.25 million tons for transport fuels and almost 2 million tons of very low-sulfur fuel oil, valid through the end of the year. They also have some 7 million tons left from previous quota batches, FGE noted.

As a result of this higher demand, Saudi Arabia’s official selling prices could rise by $0.25 per barrel for the flagship Arab Light crude, refiners participating in a Reuters survey said.

On the one hand, the new quotas suggest higher near-term demand for crude but, on the other, refining margins have sunk after the announcement of the new quotas in anticipation of a flood of new fuel supply. As a result, survey respondents forecast a relatively moderate expected hike in Saudi Arabia’s prices.

Last month, Saudi Arabia cut its prices for Asian and European buyers, after four consecutive monthly price hikes. Aramco cut prices of its Arab Light crude benchmark to Asia by $3.95 per barrel, and to European buyers by $2 a barrel, while prices for U.S. buyers saw no change, with the exception of heavier and lighter variants that will see a $0.50 per barrel increase.

The October price cuts came after record high prices in September for Arab Light, which reached $9.80 over the Oman/Dubai average per barrel, while Arab Extra Light sold for $10.95 over per barrel that same month. With the price cuts, Asian buyers for this month will pay $5.85 per barrel above the Oman/Dubai benchmark. 

Aramco normally announces its official selling prices for the following month around the fifth of the current month. This week, the fifth is also the date of the October meeting of OPEC+, where members are expected to discuss a sharp production cut of 1 million bpd or more.

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