SINGAPORE (Reuters) - Top oil exporter Saudi Arabia is expected to raise the October price of flagship Arab Light crude to Asia to its highest in at least six months on the support of robust demand in the region.
The official selling price (OSP) for Arab Light could rise by 20-50 cents a barrel in October, tracking strength in Middle East benchmark Dubai crude and Asian refining margins, a survey of five refiners and traders by Reuters showed.
Strength in naphtha margins in particular could also nudge Arab Extra Light’s OSP higher for October, one respondent said.
Weaker fuel oil margins, meanwhile, could curb any price hike for Arab Heavy, respondents said, widening the light-heavy crude price difference for the month.
The spread between first and third month cash Dubai prices has narrowed about 40 cents this month, briefly flipping into backwardation, supporting price hikes.
Prompt prices are higher than those in later months in a backwardated market, indicating stronger spot demand for oil.
Complex refinery margins in Singapore also rose to $9 a barrel, a 19-month high on Monday, after tropical storm Harvey disrupted energy supplies on the U.S. Gulf Coast, sparking speculation that Asian refined products would flow to the United States. <REF/MARGIN1> Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 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.
Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.
Reporting by Florence Tan; Editing by Tom Hogue