Saudi Aramco said to hike July prices of crude grades to Asia

Saudi Arabia is likely to raise the official selling prices (OSP) for most of the crude grades it sells to Asia in July, Reuters reported, citing trade sources.

The month-on-month hike follows signs of increased demand for Middle East crude oil, as refiners gear up for peak summer oil consumption period and increased buying by Royal Dutch Shell.

The premium between first- and third-month cash Dubai benchmark prices widened by 40 cents a barrel during May from April. This backwardation, or when prompt prices for a commodity are higher than those in future months, shows rising demand for prompt supplies.

Dubai’s strength may mean Arab Light’s OSP for July could rise by as much as 40 cents a barrel to $2.30 a barrel above the average Oman and Dubai quotes published by Platts, from $1.90 in June. That would be the highest Arab Light OSP since February 2014 when it was set at $2.45 a barrel, Reuters reported.

Meanwhile, the July OSP for Arab heavy crude could rise by between 40 cents to 50 cents a barrel, due to higher fuel oil margins in June and falling Venezuelan production.

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 of crude bound for Asia.

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.