CRUDE MOC: Middle East crude market firms after Saudi OSPs

Singapore — Middle East sour crude spreads firmed at the end of trading in Asia on June 8, indicating the August spot market could remain supported despite the rising cost of purchasing crude from the Persian Gulf for refiners in the East.

Market structure was assessed mildly higher day on day at 4:30 pm in Singapore (0830 GMT), with August cash Dubai, cash Oman and cash Murban all firming against the underlying August Dubai crude futures contract within a range of 8-17 cents/b.

All three spreads moved premiums earlier in June after spending May at significant discounts.

The upside in the Middle East sour crude complex was evident despite sharp price hikes from state-owned Saudi Aramco on June 7, which raised its July crude official selling prices to Asia by $5.60-$7.30/b month on month.

End-users said the rises would make market conditions difficult for buyers of Arabian crude as they struggle with declining product margins.

"You can see margins are nowhere near positive. I do not think refiners can sustain this kind of loss for long," a crude trader with a Southeast Asian refiner said, after analyzing the Saudi July OSPs.

Still, several market participants were of the view that the OSPs were offset by excessive supply cuts from OPEC+, paving the way for a firmer spot market in June for August loading cargoes.

Prices were "stretched a bit too far, but the market is tight on medium and heavy sour", the trader said.

Saudi Aramco also set the OSPs for its Extra Light and Medium crudes headed to Asia at a 20 cents/b premium to the average of Dubai and Oman, month-on-month rises of $6.70/b and $5.90/b, respectively.

The Saudi OSPs were expected to be followed closely by other Middle East producers selling their barrels in Asia, market participants said.