PREVIEW-Saudi Arabia may raise Jan OSPs for light grades in Asia

Reuters Middle East

* Arab Light, Extra Light OSPs set to rise for 4th straight


* Firm product cracks, bullish Dubai support

* Arab Heavy may stay unchanged on weak fuel oil

By Ramya Venugopal

SINGAPORE, Dec 4 (Reuters) - Top oil exporter Saudi Arabia

may raise its official selling price for light grades that it

sells to Asia for a fourth straight month in January, driven by

product cracks and a bullish Dubai market, a Reuters poll showed

on Tuesday.

The producer may raise its official selling price (OSP) for

Arab Light in January by 50 cents from a month ago, according to

the median of estimates of five traders and refiners. It has

raised the price for Arab Light every month since September.

The OSP for Arab Extra Light may increase by 60 cents, while

that for Arab Medium will increase by about 40 cents, the poll

showed. The OSP for Arab Heavy may remain unchanged.

Relatively firm naphtha and gasoil cracks - the profit or

loss made by a refinery by processing crude into specific

products - may lead to higher OSPs for lighter grades, while

weakness in the fuel oil market may result in a steady OSP for

Arab Heavy, traders said.

"Product cracks are looking strong and Dubai is in big

backwardation," said a refiner. "The general view is that prices

should go up, although heavy grades may not be hiked given the

current fuel oil prices."

The front-month Dubai spread widened sharply to

average 80 cents a barrel in backwardation in November, the

highest since March. Immediate prices are higher than those in

future months in a backwardated market, suggesting stronger

demand for near-term cargoes.

Spot premiums for January Middle East crude cargoes rose,

supported by the firm Dubai market, while winter demand from

north Asian refiners such as China and Japan also kept the

market buoyant, a factor that Saudi Aramco is expected to

consider while deciding OSPs.


Distillate cracks were weaker than previous months, but a

recovery at the end of November suggested there could be a pick

up in demand in the new year.

The exception was the continuing weakness in fuel oil cracks

, with the average discount widening to $10.78

from $8.42 per barrel in the previous month.

Saudi crude OSPs are usually released around the fifth of

each month, and set the trend for Iranian, Kuwaiti and Iraqi

prices, affecting some 7 million barrels per day (bpd) of crude

bound for Asia.

Saudi Aramco, the world's biggest crude exporter, 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.

Expected Saudi prices for December in Asia (in $/bbl against

the Oman/Dubai average):

Dec Change est. Jan OSP

Arab Extra Light +5.65 +0.50/+0.70 +6.15/+6.35

Arab Light +2.95 -0.45/+0.70 +2.50/+3.65

Arab Medium +0.55 +0.10/+0.50 +0.65/+1.05

Arab Heavy -1.55 -0.95/+0.30 -2.50/-1.25

(Additional reporting by Florence Tan; Editing by Himani


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