Saudi Arabia could raise April crude prices to Asia to historic highs

A view shows branded oil tanks at the Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019. REUTERS/Maxim Shemetov

SINGAPORE, March 2 (Reuters) – Saudi Arabia, the world’s biggest oil exporter, could sharply raise crude prices for Asia in April, trade sources said on Wednesday, with spreads for most grades hitting historic highs as global supply tightens due to funding issues and Russia sanctions shipping.

The Official Selling Price (OSP) of Saudi flagship Arab Light could hit a record $4.50 a barrel, up $1.70, three of five refining sources told Reuters in a survey.

Two other respondents said OSP could rise by $1.50 and $2.20 a barrel.

The sharp price increases follow strong gains in Middle Eastern benchmark Dubai last month, which hit record highs as buyers faced limited options amid tight supplies. Read more

Benchmarks Dubai, Oman and Murban continued to climb to new all-time highs on Tuesday, the first day of trading this month. The global price of Brent oil jumped more than 4% on Wednesday to its highest level since July 2014.

“It’s very difficult to make predictions, especially with so much uncertainty ahead,” said one respondent.

Light crude grades continued to be supported by strong margins for middle distillates, although some respondents expect lower price increases for heavier grades.

Even then, the PSOs for Arab Medium and Arab Heavy crude could still reach record highs in April, the survey showed.

Despite record prices, some refiners, including India’s Bharat Petroleum Corp , are seeking additional oil from Middle Eastern producers for April. read more Saudi crude PSOs are usually released around the 5th of each month and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting around 9 million barrels per day (bpd) of crude destined for Asia.

State-owned oil giant Saudi Aramco sets its crude prices based on customer recommendations and after calculating how the value of its oil has changed over the past month, based on yields and commodity prices.

Saudi Aramco officials have a policy of not commenting on the kingdom’s monthly PSOs.

Below are expected Saudi prices for April (in $/bbl vs Oman/Dubai average): MARS Change est.APRIL OSP

Extra light Arabic +3.60 +1.70/+2.35 +5.30/+5.95

Arabian Light +2.80 +1.50/+2.20 +4.30/+5.00

Average Arabic +2.75 +1.15/+2.10 +3.90/+4.85

Arabic Heavy +1.40 +0.70/+2.10 +2.10/+3.50

Source: Reuters, trade

Reporting by Florence Tan; edited by Richard Pullin

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