Saudi Aramco lowers most June OSPs for Asia, Europe from record highs

Saudi Aramco lowered almost all of its official selling prices across Asia, Europe and the Mediterranean for June-loading cargoes and kept US differentials unchanged, with Asia-bound barrels seeing the largest decreases of between $4.95/b and $5.10/b, according to a pricing document released May 8.

For Asia-bound crude, Aramco decreased Arab Extra Light, Light, Medium and Heavy by $4.95/b to premiums over the Oman/Dubai average of $4.65/b, $4.40/b, $4.35/b and $3.00/b, respectively. Super Light into Asia was lowered the most by $5.10/b to a $5.75/b premium.

The declines follow May pricing which had the highest ever differentials Aramco had ever set, according to S&P Global Commodity Insights data dating back to 1970.

Aramco was expected to lower its OSPs for June-loading crudes following tepid Asian demand fundamentals, market sources told S&P Global.

The June OSPs were expected to be slashed by $4-$6/b from May levels, trade sources said in the week ending April 29.

The Dubai cash/futures spread -- understood to be a key element in OSP calculations -- averaged $3.65/b over April, down from an average of $9.25/b in March, S&P Global data showed.

For Northwest Europe-bound crude, Aramco dropped its Extra Light grade by $2.50/b, to a $5.60/b premium to ICE Brent, and its Light grade was down $2.50/b to plus $2.10/b. Arab Medium decreased by $2.00/b to a discount of 10 cents/b, while Arab Heavy dropped $3.00/b to a $4.10/b discount to ICE Brent.

Mediterranean-bound crudes also dropped, except for the Arab Extra Light OSP, which remained unchanged at a $5.60/b premium to ICE Brent. Arab Light was down $3.00/b to a $1.90/b premium to ICE Brent. Medium dropped $2.00/b to a premium of 20 cents/b to the benchmark. Arab heavy decreased $3.00/b to a discount of $3.00/b to ICE Brent.

For US-bound crudes, Aramco maintained pricing for all grades from May. The Extra Light OSP was set at a $7.00/b premium over ASCI. Arab Light, Medium, and Heavy grades were kept as well at premiums of $5.65/b, $4.95/b, and $4.50/b, respectively.

Abu Dhabi National Oil Co. on May 7 lowered the June OSP for its flagship Murban crude oil by 7% from May loadings amid weak demand in key consuming countries in Asia.

Demand cues remain sluggish from China and Japan as Beijing strives to contain a coronavirus outbreak while Japan marks Golden Week holidays ahead of refinery turnaround season.

Oil prices have been fluctuating over concerns that the Russia invasion of Ukraine and economic sanctions on Moscow would crimp global oil supplies. However, weaker demand in Asia is tempering the oil price rally, which pushed prices nearly to $140/b in March, but have since dropped to around $110/b.

Platts Dated Brent benchmark was assessed on May 6 at $114.325/b, up by 1.7% on the day, according to S&P Global data.

The global oil price volatility comes as OPEC and its Russia-led partners approved on May 5 another modest 432,000 b/d increase in production quotas for June, continuing to look past the impacts of the war in Ukraine on the market as they benefit from a windfall in oil revenue.

Even with an expected European ban on Russian oil supplies set to squeeze global supplies further, the 23-country OPEC+ alliance insisted that current supply-demand indicators "pointed to a balanced market," according to a statement after the group met for just 13 minutes to reaffirm its plan for monthly measured quota hikes.

Unclear visibility on the extent of China's demand losses because of tightened coronavirus lockdown restrictions is also a concern, delegates said in explaining why the group saw no reason to change course.

The alliance will meet next June 2 to decide on July quotas.