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Middle East crude mixed as traders digest Aramco price hikes

Singapore — The Dubai crude futures complex remained within a steady range with mixed movement on intermonth spreads Friday morning in Asia, as markets opened to unexpected price hikes from Saudi Aramco after a public holiday in the region.

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"Saudi OSPs [are] too expensive, no logic for the increase at all," said a Singapore-based crude trader, with equity in some Middle Eastern barrels.

There were "mixed feelings" about the hikes, said a second trader, adding that traders were now assessing the odds of "other producers setting OSPs at reasonable levels, so probably other grades [may] get more support."

At 11 am in Singapore, the July outright Dubai crude futures contract slid 3.7% from its Wednesday close of $32.43/b, and was pegged at $31.23/b (0300 GMT, Friday).

Intermonth spreads on the Dubai curve posted mixed results, with the June/July spread edging up a few notches from minus 65 cents/b assessed Wednesday, to minus 60 cents/b at 11 am on Friday morning in Singapore.

But further, out, the July/August spread slid 11 cents/b in the same time period, from minus 53 cents/b to minus 64 cents/b as of Friday morning, S&P Global Platts data showed.

Crude traders in Asia were digesting an unexpected price hike from Saudi Aramco on Thursday, when the state-owned entity issued its June OSPs.

Aramco raised its June official selling prices for all regions and almost all grades as the world's largest oil exporter signaled an easing in the two-month price war that has pushed producers' margins close to zero.

The company's monthly pricing is one of the most closely watched data points in the global oil market, and will pave the way for other producers when they release their respective OSPs in the coming days.

The hikes came as a surprise to the crude market in Asia, which had estimated cuts across all five Asia-destined grades by $1-$3/b month on month.

But recently, Middle East crudes have departed from conventional price-setting methodology amid a period of uncertainty and hotly contested market share.

"For the past two months, they [producers] have not been setting their OSP in proportion to what's happening in the market," a trader had said as part of Platts' survey earlier this week.

Aramco's June notice also showed the OSP differentials for lighter Arab crudes sliding in comparison to Arab Medium and Heavy, a point several OSP survey respondents had made earlier this week to Platts.

Lesser availability of medium and heavy crude barrels, and poor performance of light products in recent weeks were cited as some reasons for the move by survey participants.