The dominant force in the global oil market, Saudi Arabia, is poised to raise the official selling price (OSP) for its premier Arab Light crude in May, a move that is expected to influence pricing throughout Iran, Kuwait, and Iraq.
Industry insiders suggest that the May OSP for Arab Light could see an increment of $0.20 to $0.30 per barrel from its April figure. Additionally, Arab Extra Light is projected to experience a steeper rise of $0.30 to $0.50 per barrel, mirroring the heightened premiums of Abu Dhabi’s Murban crude of comparable quality.
Intensified demand from Asia has led to a notable increase in the average premium for May ICE futures against Dubai swaps, soaring by $0.58 to $1.73 a barrel, as per data compiled by Reuters.
Concurrently, maintenance activities in Saudi oilfields are tightening supply, while escalating domestic consumption in the Middle East is expected to further drive up May OSPs for Saudi Arabia’s Arab Medium and Arab Heavy crudes.
The decision by OPEC+ to maintain production cuts has also contributed to the upward pricing pressure. The alliance recently confirmed the extension of voluntary reductions amounting to 2.2 million barrels per day, a strategic move in response to increasing production from non-member countries. As part of this arrangement, Saudi Arabia has consented to continue its voluntary cutback of one million barrels per day until the end of June, reducing its output to approximately nine million barrels daily.
Despite the ongoing geopolitical unrest and threats to maritime security in the Red Sea, oil prices have remained resilient. However, there is a shared concern among OPEC+ nations regarding the potential impact of sluggish economic advancement on the market.
Reuters has highlighted that Saudi Crude OSPs, typically set on the fifth of each month, not only dictate the pricing for Asian-bound crude, which encompasses nine million barrels per day, but also serve as a pricing benchmark for the region’s oil exports. The determination of these prices involves a meticulous evaluation by state-owned giant Saudi Aramco, which factors in customer feedback and the prior month’s oil valuation changes.