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General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah/File Photo
SINGAPORE, Sept 30 (Reuters) - Top oil exporter Saudi Arabia may just trim November crude prices for customers in Asia even though Middle East benchmarks posted wider declines this month, industry sources said.
State oil giant Saudi Aramco, which typically sets prices based on the monthly change in benchmark Dubai's market structure, is expected to deviate from its usual pricing formula as it already slashed October prices, they said. read more
Of the seven respondents in a Reuters survey, five expected the November official selling price (OSP) for Arab Light crude to fall by 20 cents. If Saudi Aramco sets prices based on its formula, they said, it would have to reduce them by 70-80 cents.
"Last month Saudi cut more than expected. This month we don't think they will be so generous," one respondent said.
Most of the respondents see bigger price cuts of 20-40 cents for heavier grades - Arab Medium and Arab Heavy - as ample supplies continued to weigh on value for these grades.
For example, Banoco Arab Medium crude, similar in quality to Saudi's Arab Medium, has traded this month at 30-50 cents below its OSP for November-loading cargoes, a second respondent said.
A third respondent, however, said strong fuel oil margins could support prices.
Consumers are switching to oil for power generation after prices of liquefied natural gas (LNG) surged.
The LNG price rally has widened its gap with oil prices and could boost oil demand in Asia by 400,000 barrels a day (bpd) on average over the next two quarters, according to consultancy Rystad Energy. read more Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million 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.
Below are expected Saudi prices for November (in $/bbl against the Oman/Dubai average): OCT Change est.NOV OSP
Arab Extra Light +2.00 -0.30/0.00 +1.70/+2.00
Arab Light +1.70 -0.20/0.00 +1.50/+1.70
Arab Medium +1.45 -0.40/-0.10 -1.05/+1.35
Arab Heavy +0.40 -0.40/-0.10 0.00/+0.30
Source: Reuters, trade
Reporting by Florence Tan; Editing by Tom Hogue
Our Standards: The Thomson Reuters Trust Principles.
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Saudi Arabia may trim November crude prices for Asia - Reuters
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