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Analysis: Asian crude traders digest 4-year highs in Saudi, ADNOC OSPs

Singapore — Crude oil traders and end-users in Asia were digesting multi-yearhigh prices for key Middle Eastern crude grades Friday after sellers hikedtheir latest official selling prices on the back of a rallying spot market.

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"I guess Saudi OSPS [look] a bit expensive, ADNOC's look reasonable,"said a source at a trading house.

Middle Eastern producers Saudi Aramco and Abu Dhabi National Oil Co.released their respective OSPs this week, with sweeping hikes across the boardfor crude oil grades headed to Asia.

"Saudis were on the higher end, but everything else seems reasonable,"said a Japanese end-user.

"They did not moderate at all," said a Singapore-based trader of theSaudi OSPs.

Saudi Aramco hiked the OSP for Arab Super Light by $1.20/b from May to apremium of $6.30/b to the average of Oman/Dubai in June, a four-year high; itwas last higher in June 2014 at a premium of $6.45/b, S&P Global Platts datashowed.

Traders may have been expecting gentler hikes from the kingdom due tothe higher-than-expected rise in the Arab Light OSP differential last month,sources said.

OSP differentials for Aramco's other grades to Asia were also raised tolevels not seen since 2014. The Arab Extra Light premium was set at $3.25/b;it was last higher in September 2014 at a premium of $3.40/b.

Arab Light, considered the kingdom's key crude grade, was set at apremium of $1.90/b this month. It was last higher in August 2014 at a premiumof $2.05/b.

Some traders balked at the month-on-month rises, while others were moreaccepting.

"Theoretical value for Arab Extra Light was $3.44/b. [At $3.25/b, it] ischeaper than the theoretical value," said one source.


Strength in the sour crude market justified higher OSPs this month,although the price hikes were substantial and needed some time to be digestedby the market, crude sources in Asia said.

"I guess 70 cents/b for Arab Light is OK," said one sour crude trader.

A firmly backwardated Middle East sour crude market structure was largelythe reason for the hike, market participants said, noting an ever-wideningBrent/Dubai Exchange Futures for Swaps spread also played a key role.

The spread between the June Dubai cash and swap averaged 81 cents/b inApril. The swap-cash spread or "structure" is seen as being a key point ofconsideration for producers such as Saudi Aramco when deliberating monthly OSPchanges.

Other producers, such as ADNOC, may look at the price differentials thatits three grades trade at in the spot market during a particular month,traders said.

ADNOC's Murban crude, for instance, was heard to have traded at premiumsof around 20-25 cents/b to the grade's OSP for June loading cargoes. Theemirate raised the April Murban OSP differential to Dubai by 27 cents/b to apremium of $3.63/b, or an outright price of $71.90/b.

"ADNOC levels are OK, in line with where they traded," said theJapanese end-user.

The Murban OSP was last higher in November 2014 at $77/b, while the OSPdifferential to Dubai was last higher in March 2014 at a premium of $3.98/b toDubai assessments for the month.

--Eesha Muneeb,

--Edited by Wendy Wells,