Saudi Aramco's Asia-bound December OSPs 'within expectations': traders

Singapore — Saudi Aramco had set official selling prices for its December-loading barrels bound for Asia at levels which were within expectations and reflective of changes in the Middle East crude price structure and product margins, traders told S&P Global Platts Nov 6.

The Middle East's biggest producer had lowered the OSPs of three out of its five crude grades by 10-20 cents/b, while it raised and maintained the OSPs of its remaining two grades, the company said in a pricing letter on Nov. 5.

"[Saudi OSPs] are within expectations for Asia," a Singapore-based crude oil trader said.

Saudi Aramco had lowered the differentials for its Arab Extra Light and Arab Light crude grades by 10 cents/b to discounts of 70 cents/b and 50 cents/b, respectively, against the average of Platts Dubai crude assessments and the average of DME Oman settlements in December, while Arab Super Light was cut by 20 cents/b to a premium of 65 cents/b against Oman/Dubai.

The producer, however, raised its Arab Medium OSP by 10 cents/b to a discount of 20 cents/b to Oman/Dubai and left its Arab Heavy price unchanged at a discount of 30 cents/b to Oman/Dubai, according to the letter.

Market participants surveyed by Platts last week had expected the oil producer to either lower, raise or set the OSP differentials steady from the November OSPs, within a range averaging between minus 10 cents/b cut to a 10 cents/b increase.

"I think [the OSPs] somehow follows the rationale usually used," a North Asian crude oil trader said, noting that the OSP changes were in line with the movement in the Middle East crude oil price structure.

A key price indicator for the Middle East sour crude market, the cash Dubai-futures spread, averaged at a discount of 67 cents/b in October, down from an average of minus 53 cents/b over the whole of September, Platts data showed.

The price indicator, tracked by Middle East producers to define the core direction and extent of price hikes or cuts, had suggested that producers could lower their respective OSP differentials for December.

Traders also indicated that the December OSPs were reflective of the trend seen for oil product margins in October versus September.

"I think this month's Saudi OSPs seem fair and within our expectations, reflecting [oil] product margin," a crude oil trader with a North Asian refiner said.

Light distillates, which performed well earlier in October, had slid towards the end of the month resulting in a lower month to month average, Platts data showed.

The second month naphtha swap crack versus Dubai swap averaged 14 cents/b in October, 6 cents/b lower than the average in September. Similarly, the second month 92 RON gasoline product swap had averaged at $3.41/b against the Dubai swap in October, down 20 cents/b month on month, according to the data.

Middle distillates, meanwhile, rebounded from multi-year lows in September with the second month gasoil and jet fuel swap crack spread versus Dubai swap averaged at $3.75/b and $1.75/b in October, up 28 cents/b and $2.14/b, respectively, from September, Platts data showed.

As there were no surprises with the December OSPs, Asian refiners will likely make minor changes to their term volume nominations for December loading barrels from Aramco, keeping the volume largely similar to November, one trader said.

Following the issuance of the OSPs, term lifters will typically nominate term volumes, which will be followed by final allocations issued by Aramco during the second week of the month.

Last month, Asian refiners said they received their full term allocations from Aramco for November barrels -- the third consecutive month that Aramco has committed to fulfilling Asian term volumes.