MOSCOW (MRC) -- Asian refiners see Saudi Arabia cutting the official selling prices (OSP) of its crude for a fourth straight month in June after Middle East benchmarks slumped on poor refining margins as the coronavirus pandemic slammed demand, reported Reuters.
Saudi Arabia is expected to reduce the June OSP for Arab Light crude by USD3.72 a barrel, according to an average of estimates from six refinery sources in a Reuters survey. All respondents said they expect a cut, though predictions ranged from just 50 cents to as much as USD7.50.
"Refining margins are not good," said one of the respondents, who all declined to be identified due to the sensitivity of the matter. "Products are discounted and buyers are few."
Earlier this month, Saudi May prices for Asian buyers were slashed by USD2.95-USD5.50 a barrel, in line with expectations.
Oil markets globally are flooded with cheap oil with storage space and floating tanks filling up fast.
Many refiners have lowered output amid coronavirus lockdowns. But Chinese refiners are on the hunt for cheap barrels, increasing processing rates as the world’s second-largest economy gradually picks up steam with its coronavirus outbreak largely contained.
"Their domestic market is an exceptional case," said another survey respondent.
Prices for Arab Medium and Arab Heavy are expected to fall less than lighter grades due to tighter supply of heavier crude barrels, four of the respondents said.
Asia’s gasoline and naphtha margins improved in April, while gasoil and jet fuel margins sank to record lows earlier this week.
Margins for low-sulphur fuel oil remained pressured, while high-sulphur fuel oil margins were helped by tighter crude supply expectations: Producers from Saudi Arabia to Russia are set to cut production by 9.7 million barrels per day (bpd) from May.
Three survey respondents saw price cuts of no more than USD2 a barrel for all Saudi grades, citing low crude prices limiting scope for further reductions.
Saudi crude OSPs are usually released around the fifth of each month and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million bpd of crude bound for Asia.
State oil giant Aramco sets 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.
As MRC informed earlier, Saudi Aramco’s plan to buy USD15-billion stake in Reliance Industries hydrocarbon business may not go through due to the rising risk of collapsing oil prices, US-based brokerage Bernstein has warned. The unique combination of excess crude oil global supply, 30% drop in demand due to coronavirus crisis and continuous price fall weighed heavily on Aramco’s investment plans.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
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