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Banks

Iran set to raise April light crude prices to Asia on strong demand

NEW DELHI (Reuters) - OPEC’s third-largest producer Iran is expected to raise the April price of its flagship light crude for Asian buyers to the highest versus a similar Saudi grade since 2011, as a lifting of nuclear sanctions this year buoys demand for its oil.

A worker grabs a nozzle at a petrol station in Tehran, Iran January 25, 2016. REUTERS/Raheb Homavandi/TIMA ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. FOR EDITORIAL USE ONLY.

Iran has resumed crude sales to Europe after world powers did away with most of the sanctions against Tehran in January, and the Islamic republic is expected to raise its oil exports in March to around 1.65 million barrels per day (bpd) from 1.5 million bpd a month earlier.

The rising European demand and a bigger proportion of heavy versus light crude production in Iran may also be limiting the supply of some grades to Asia.

“With Europe coming back, and requirements also rising from Korea, Japan and India, we won’t have (many) extra barrels,” said an Iranian oil official who declined to be named as he is not authorized to speak to media.

Most of Iran’s increased output since sanctions were lifted has also been on the heavy side, the official also said.

Iran is expected to price its light crude at 50 cents a barrel below the average of Oman and Dubai quotes to Asia in April, up 30 cents from the previous month, a source with knowledge of the matter said.

This places the official selling price (OSP) for Iranian Light at 25 cents a barrel above Saudi’s Arab Light, the highest premium since 2011, trade data showed.

Iran is “maximizing the value for its existing production ... (looking at) where they can get better netbacks,” said Chris Midgley, head of oil markets analysis at Shell Trading.

STAYING COMPETITIVE ON HEAVY CRUDE

The move comes a month after Iran discounted its heavy crude against Saudi Arabia to the lowest since 2008 in a battle among producers for market share.

And Iran is expected to maintain prices for the bulk of its production to keep its heavy grades competitive against similar crudes from Saudi Arabia and Iraq.

The April OSP for Iranian Heavy could be set at $2.60 a barrel below Oman/Dubai quotes, unchanged from March, the source with knowledge of the matter said.

Forozan is also expected to remain unchanged in April at $2.43 a barrel below Oman/Dubai quotes, the source said. For Souroush crude, Iran will either keep it unchanged or cut the price by a smaller extent than Saudi’s Arab Heavy.

Saudi Arabia cut the April OSP for Arab Heavy by 25 cents on Wednesday.

Iran will announce its OSPs to customers early next week.

Reporting by Nidhi Verma in New Delhi; Additional reporting Chen Aizhu in Beijing and Florence Tan in Singapore; Editing by Tom Hogue

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