July 2, 2018 / 7:39 AM / 10 months ago

PREVIEW-Saudi Arabia may cut Aug Arab Light crude price from 4-yr high

    * Arab Light crude OSP to fall by 20-40 cents/bbl
    * That is according to survey of 6 refiners, traders
    * Light grades to drop as naphtha, gasoline margins decline
    * Peak summer demand support Arab Medium, Heavy

    By Florence Tan
    SINGAPORE, July 2 (Reuters) - Top oil exporter Saudi Arabia
is in August expected to cut the price for flagship Arab Light
crude from the highest in four years, after refining margins in
Asia dropped to a two-year low, trade sources said on Monday.
    The official selling price (OSP) for Arab Light crude could
fall by 20-40 cents a barrel in August, a Reuters survey of six
Asian refiners and traders showed.
    The grade's July OSP rose by 20 cents to a premium of $2.10
a barrel to the average of Platts Oman and Dubai quotes, the
highest since July 2014.             
    "Arab Super Light, Arab Extra Light and Arab Light all need
price adjustments to stay competitive with other light grades,"
said a trader with a North Asian firm, adding that there were
ample supplies of such oil in the market.
    Saudi Arabia has boosted supply to 10.70 million barrels per
day in June, close to a record-high and up 700,000 bpd from May,
a Reuters survey showed last week, a sign the kingdom wants to
make up shortfalls elsewhere in the group and moderate prices.
    Also, Asia's oil refining margins dropped to their lowest in
two years last week, dragged down by lower gasoline margins as
refiners have ramped up output after completing maintenance and
as China stepped up exports.             
    The average monthly gasoline margins for Asia dropped to
$5.61 in June, the lowest monthly level since August 2016, while
June naphtha profits have also fallen to the lowest monthly
average in two months, Reuters data showed.
    On the other hand, a recovery in fuel oil margins and robust
summer demand will support Arab Medium and Arab Heavy OSPs,
leading to steady or higher prices in August, five of the six
survey respondents said.
    Medium-heavy sour crude supplies are also tightening as
Venezuelan exports decline, while imminent U.S. sanctions
threatened to cut off exports from Iran, they said.        
    Saudi crude OSPs are usually released around the fifth of
each month, and set the trend for Iranian, Kuwaiti and Iraqi
prices, affecting more than 12 million barrels per day (bpd) of
crude bound for Asia.
    State oil giant Saudi Aramco sets its crude prices based on
recommendations from customers and after calculating the change
in the value of its oil over the past month, based on yields and
product prices.
    Saudi Aramco officials as a matter of policy do not comment
on the kingdom's monthly OSPs.
    Below are expected Saudi prices for August (in $/bbl against
the Oman/Dubai average):
                         JULY      Change         est.AUG OSP  
    Arab Extra Light    +3.30     -1.00/-0.40     +2.30/+2.90  
    Arab Light          +2.10     -0.40/-0.20     +1.70/+1.90  
    Arab Medium         +0.35     -0.35/+0.10      0.00/+0.45  
    Arab Heavy          -0.65     -0.35/+0.30     -1.00/-0.35
    Source: Reuters, trade     

 (Reporting by Florence Tan
Editing by Joseph Radford)
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