Saudi applies steep increases to December OSPs on firm refining margins

7 Nov 2021

Quantum Commodity Intelligence - Saudi Aramco has sharply increased Official Selling Prices (OSPs) for December-loading crude oil for all regions, the first hike in three months following healthy refining margins and steep market backwardation among key crude benchmarks.

For Aramco's key customer base in Asia, differentials for the flagship Arab Light grade were hiked by $1.40 per barrel versus Platts Dubai/DME Oman to +$2.70/b, while Arab Medium was increased by $1.30/b to +$2.35/b and Arab Heavy up $1.10/b to +$1/b.

Steeper increases were applied to lighter barrels as demand for light-ends and distillate-rich grades loading in December rocketed.

Arab Extra Light was increased by $2.20/b to Dubai/Oman +$4.00/b and Super Light by $2.80/b to +$5.85/b.

Healthy increases were largely anticipated for Asian OSPs, but the differentials were at the high end of expectations.

"Stronger than anyone expected," Vitol's head of Asia, Mike Muller, told a webinar hosted by Gulf Intelligence Sunday, although he noted strong refining margins underpinned the sharp increases.

On Friday, December 10ppm gasoil swaps were pegged at around $11.60/b over Brent, while 92 RON gasoline for the same month was close to +$9/b, albeit down from premiums of over +$11/b at the start of the week, according to Quantum data.

Meanwhile, steep backwardation also underscored the OSP increases to Asia, with Dubai backwardation on the front-month Jan22/Feb22 spread ballooning to more than $2/b on Friday.

In Europe, Northwest Europe differentials vs ICE Brent were increased $1.00/b to $3.30/b, with the largest hikes applied to Extra Light and Light. Mediterranean differentials were increased by $1.10/b to $3.00/b against ICE Brent.

Meanwhile, OSPs to the US were hiked across the board by $0.50/b against the Argus ASCI sour crude benchmark.

The US had led calls last week for OPEC+ to increase production by more than 400,000 bpd in December, but the producer alliance stuck to its previously-agreed output plan.

Vitol's Muller said that the OPEC+ decision comes at no surprise, noting that the December trading cycle for Asia crude oil has largely been completed, making it difficult to market additional barrels.