Saudi Arabia: Reduction of Official Selling Prices for Crude Oil to Asia

Saudi Aramco reduces its December official selling prices for crude oil bound for Asia, a move in line with market expectations. Adjustments vary by crude type, with larger cuts for lighter grades.

Share:

Saudi Arabia’s national oil company, Saudi Aramco, announced a reduction in its official selling prices (OSP) for crude oil bound for Asia in December. This decision was well-received by Asian traders, who anticipated these adjustments due to several supply and demand factors in the region. The reduction primarily affects lighter crudes, while heavier crudes, potentially impacted by supply constraints, see more moderate reductions.

The OSP for the flagship crude, Arab Light, was reduced by 50 cents per barrel, setting a new price at $1.70 per barrel above the average Platts Dubai and Oman prices. Other light crudes, Arab Extra Light and Super Light, also saw reductions of 50 cents per barrel for December. Meanwhile, the heavier crudes, Arab Medium and Heavy, recorded a smaller decrease of 40 cents per barrel.

Market Expectations and Traders’ Reactions

Asian traders and end-users had anticipated cuts in the range of 40 to 70 cents for the lighter grades, a level consistent with the monthly change in the Dubai structure, a factor regularly considered by Aramco when adjusting its OSPs. The flagship Arab Light recorded a reduction slightly below market expectations, which had projected a decrease between 60 and 70 cents per barrel for the lighter crudes, due to fluctuating demand in the Asian region.

In October, the average cash Dubai price for the month registered a premium of $1.58 over futures contracts, marking a 45-cent drop from the previous month. This lower level reflects the decline in premiums on the Dubai market, thus influencing Aramco’s adjustments for its Asian sales.

Maintenance and Supply Prospects

Discussions around potential maintenance for certain Saudi crude fields, including medium and heavy crudes, continue to fuel speculation about a potential supply reduction. Although these operations have not been confirmed by Saudi Aramco, they could affect the supply for November and December trading cycles. Aramco is expected to confirm allocated volumes for December and January cargos in the coming weeks, further clarifying supply prospects for the months ahead.

Some market participants believe that the upcoming January loading period could be marked by an excess supply of some sour crude grades, fostering a bearish sentiment for that period. Recent Dubai Cash assessments have shown a significant weakening, with the spread against futures contracts reaching historically low levels for 2024.

Expected Improvement in Refining Margins in Asia

Despite the crude price downturn, the short-term outlook for Asian refiners appears to be improving. Demand for the end of the year, driven by travel and heating needs, is expected to support a gradual recovery in refining margins, following several months marked by particularly low margins.

Refining margins, calculated based on the Dubai-Singapore netback, averaged $4.67 per barrel for the month to November 5, up from an average of $1.65 in October and only 9 cents in September. Petroleum sector analysts and refiners in Asia are optimistic that this improvement will continue, with margins expected to remain higher over the coming months.

Petro-Victory Energy announces the completion of drilling operations for the AND-5 well in the Andorinha field, Brazil, with positive reservoir results and next steps for production.
The Colombian prosecutor’s office has seized two offices belonging to the oil company Perenco in Bogotá. The company is accused of financing the United Self-Defense Forces of Colombia (AUC) in exchange for security services between 1997 and 2005.
Indonesia has signed a memorandum of understanding with the United States to increase its energy imports. This deal, involving Pertamina, aims to diversify the country's energy supply sources.
VAALCO Energy continues to operate the Baobab field by renovating its floating platform, despite modest production. This strategy aims to maintain stable profitability at low cost.
An empty reservoir exploded at a Lukoil-Perm oil facility in Russia, causing no injuries according to initial assessments pointing to a chemical reaction with oxygen as the cause of the accident.
The British Lindsey refinery has resumed fuel deliveries after reaching a temporary agreement to continue operations, while the future of this strategic site remains under insolvency proceedings.
BP and Shell intensify their commitments in Libya with new agreements aimed at revitalizing major oil field production, amid persistent instability but rising output in recent months.
The private OCP pipeline has resumed operations in Ecuador following an interruption caused by heavy rains, while the main SOTE pipeline remains shut down, continuing to impact oil exports from the South American country.
McDermott secures contract worth up to $50 million with BRAVA Energia to install subsea equipment on the Papa-Terra and Atlanta oil fields off the Brazilian coast.
Saudi Aramco increases its oil prices for Asia beyond initial expectations, reflecting strategic adjustments related to OPEC+ production and regional geopolitical uncertainties, with potential implications for Asian markets.
A bulk carrier operated by a Greek company sailing under a Liberian flag suffered a coordinated attack involving small arms and explosive drones, prompting an Israeli military response against Yemen's Houthis.
The Canadian government is now awaiting a concrete private-sector proposal to develop a new oil pipeline connecting Alberta to the Pacific coast, following recent legislation intended to expedite energy projects.
Petrobras is exploring various strategies for its Polo Bahia oil hub, including potentially selling it, as current profitability is challenged by oil prices around $65 per barrel.
Brazilian producer Azevedo & Travassos will issue new shares to buy Petro-Victory and its forty-nine concessions, consolidating its onshore presence while taking on net debt of about USD39.5mn.
Major oil producers accelerate their return to the market, raising their August quotas more sharply than initially expected, prompting questions about future market balances.
Lindsey refinery could halt operations within three weeks due to limited crude oil reserves, according to a recent analysis by energy consultancy Wood Mackenzie, highlighting an immediate slowdown in production.
The flow of crude between the Hamada field and the Zawiya refinery has resumed after emergency repairs, illustrating the mounting pressure on Libya’s ageing pipeline network that threatens the stability of domestic supply.
Libreville is intensifying the promotion of deep-water blocks, still seventy-two % unexplored, to offset the two hundred thousand barrels-per-day production drop recorded last year, according to GlobalData.
The African Export-Import Bank extends the Nigerian oil company’s facility, providing room to accelerate drilling and modernisation by 2029 as international lenders scale back hydrocarbon exposure.
Petronas begins a three-well exploratory drilling campaign offshore Suriname, deploying a Noble rig after securing an environmental permit and closely collaborating with state-owned company Staatsolie.