Saudi OSPs set for steep cuts in January as Dubai structure collapses

24 Nov 2022

Quantum Commodity Intelligence - The collapse in the Dubai crude market structure this month will almost certainly lead to sharp reductions in Saudi Aramco’s Official Selling Prices (OSPs) on January-loading crude to Asia, according to analysis of Quantum data Wednesday.

The prompt M1/M3 Dubai spread (Jan23/Mar23), which sources say is a significant component in OSP calculations, has averaged $2.97/b so far in November, compared to an average of $4.75/b October when Dec22/Feb23 was the M1/M3 Dubai spread.

However, the M1/M3 set a yearly low of $0.85/b on Wednesday and the month average is set to narrow sharply heading into next week’s expiry.

OSPs are closely linked to market structure, as Saudi barrels are priced during the month of loading, so they include two months of market structure.

Aramco's flagship Arab Light grade was cut to Platts Dubai/DME Oman +$5.45/b for loading next month versus +$5.85/b on November cargoes.

Early speculation from traders suggested January OSPs could be looking at reductions of around $2/b, although sources said no decision will be taken until after the 4 December OPEC meeting.   

Furthermore, Dubai spreads for the first half of 2023 crashed into contango on Wednesday, with the first five intermonth spreads of the new year showing a negative structure.

Outright prices for January Dubai crude slumped to a near 11-month low Wednesday of $77.64/b, as Asian markets tumbled on continued sluggish demand as China continues its zero-Covid strategy, while a potential glut of discounted Russian crude heading for Asia is competing with Middle East barrels.