Top oil exporter Saudi Arabia may raise crude prices for Asian buyers in March to their highest in more than a year after benchmark prices spiked on higher demand from China and India as U.S. sanctions disrupted Russian supply, traders said on Monday.
The March official selling price (OSP) for flagship Arab Light crude may jump by $2-$2.50 a barrel from February, three of four Asian refining sources said in a Reuters survey. The remaining source expects a $3-a-barrel rise across all grades.
That suggests the March Arab Light price could climb to a premium of at least $3.50 a barrel to the average of the benchmark Oman and Dubai prices, the highest since January 2024, from February's premium of $1.50 a barrel, Reuters data showed.
A $2-a-barrel hike in the premium would also mark the biggest monthly increase since the OSPs were set for August 2022, the data showed.
The March OSPs for the country's other grades - Arab Extra Light, Arab Medium and Arab Heavy - are expected to increase by at least $1.80, the survey showed.
These forecasts generally tracked the change in the market structure for the first- and third-month Dubai prices. So far in January, the backwardation in the Dubai market has widened by $2.05 a barrel from the previous month, Reuters data showed.
Backwardation is the market structure when prompt prices for a commodity are higher than for future months, indicating tight supply or higher demand.
However, gains in future prices may be constrained given weak demand and thin margins among Asian refiners, some of the respondents said.
The administration of former U.S. President Joe Biden announced on Jan. 10 further sanctions targeting Russian producers, tankers and insurers, disrupting supply from the world's No. 2 producer and tightening ship availability.
That prompted Chinese and Indian refiners to seek replacement cargoes and pushed up spot premiums for Oman and Dubai to their highest since November 2022.
OPEC+, which pumps about half the world's oil, agreed in early December to push back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026. The group will meet on Feb. 3 amid calls by U.S. President Donald Trump to reduce oil prices. Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day of crude bound for Asia.
State oil giant 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.
Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.
