By Luke Pachymuthu and
Judy Hua Reuters
SINGAPORE: Top oil exporter Saudi Arabia?s deeper than expected cuts to its February official crude selling prices (OSPs) for buyers in Asia are unlikely to drum up interest for additional supply.
Demand from refiners was expected to be stable, industry sources said.
?We will nominate based on demand from our refineries, not based on prices because after Saudi cut its OSPs, Kuwaiti, Iraqi and Iranian crude prices will also be cut,? said a source with a Northeast Asia refiner. ?We see stable demand from refineries in February.?
The kingdom?s state oil firm informed customers Wednesday that it had set its OSP for February Arab Light barrels to Asia at the Oman/Dubai average plus $2.05 a barrel, down from $4.15 a barrel in January.
Regional refiners and traders had expected Saudi Arabia to cut prices by about 50 cents according to a Reuters poll on Dec. 29.
?It was a surprise, we expected a cut in line with the weaker distillate margins, but we didn?t think it would be this deep,? an Asian based trader said.
Gasoil margins, the key profit indicator for refiners, dipped to around $16.82 a barrel in late December, the lowest its been since mid-October but has since recovered to around $18 a barrel, Reuters data showed.
Saudi Arabia, which last month announced that it had boosted output to over 10 million barrels per day, raised prices for its January crude supplies between $1.60 and nearly $2 a barrel, much to the chagrin of its Asian customers in the region.
?The prices we saw in January were ridiculously high, many lifters felt it didn?t truly reflect market fundamentals,? a Singapore-based trader said.
Incremental demand in the region has been cool as arbitrage cargoes from the North Sea move to Asia, following the recent shutdown of Petroplus refining operations in Europe.
Some traders pointed to the start of the turnaround season in the spring as another reason for the lower than expected Saudi crude prices.
On Thursday, Reliance Industries said it was planning scheduled maintenance at one of its crude distillation units at its refinery complex in Jamnagar. The maintenance is expected to last for three weeks.
Global oil benchmarks have been given a boost on fears of potential supply disruptions from Iran, as the war of words between Tehran and the West heats up.
?This saga has lifted oil prices, flat prices go up ... it only makes sense for OSPs to come off,? a Singapore-based trader with a Wall Street bank said.
?The cuts by the Saudis would definitely help to balance things out.?
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