Saudi Arabia set higher-than-expected official selling prices (OSPs) for most grades in August, a move that is likely to set a floor for values of Middle East crude in the coming month.
Asian refiners may skip taking extra crude from top exporter Saudi Arabia as the kingdom failed to cut prices deeply enough to lure buyers and as the release of reserves by the IEA is boosting supplies in the region.
Top consumers such as China, Japan and South Korea have not come forward yet to ask for additional supplies even as Saudi Arabia offered more oil to some Asian buyers for August on top of contractual volumes, an industry source said yesterday.
"The cuts in Saudi OSPs are far less than expected, especially when you compare the cuts in Qatar and UAE OSPs," a trader at a major Saudi crude buyer said.
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"For August loading cargoes, we plan to nominate according to the long-term contact. We haven't seen any additional demand from our refineries so far."
"The new Saudi OSPs are unusually high. The August Arab Medium OSP is the most incredible among all the Saudi OSPs," a trader at a Chinese trading house said. "We won't buy any more Saudi barrels beyond our long-term contract."
Timespreads along the Dubai curve strengthened on the back of the Saudi OSPs, narrowing the contango between August and September to 20 cents from 26 on Tuesday and to 17 cents between September and October from 21 cents a day earlier.
Saudi Arabian oil exports may trail far behind rising output this summer as its power stations burn more crude than ever before to keep a booming population cool, part of a trend that is squeezing spare output capacity, analysts say.