Saudi Aramco seen lowering July crude prices as Asia premiums fade

Saudi Arabia is expected to lower the official selling prices of its crude to Asia in July for a second straight month, as softer demand and weaker spot-market premiums put pressure on the kingdom’s pricing.

The flagship Arab Light grade may be priced at a premium of $7.50 to $12.50 a barrel over the average of Dubai and Oman quotes, the survey showed.

That would mark a reduction of $3 to $8 from June levels.

The expected cut reflects a softer trading backdrop in Asia, where refiners have been reducing crude runs and imports after high prices squeezed margins.

Survey points to lower July prices

Five industry sources responded to the Reuters survey, with all expecting Saudi Aramco to reduce July official selling prices for crude grades sold to Asia.

Saudi Aramco usually releases its monthly OSPs around the fifth day of each month. The company does not comment on pricing as a matter of policy.

A lower Arab Light price would signal that the world’s largest oil exporter is adjusting to weaker regional demand and a retreat in spot premiums after a sharp run-up earlier this year.

Spot premiums retreat

The expected cuts follow a weaker May spot market. The cash Dubai premium to swaps averaged $8.90 a barrel in May, down from $13.92 in April.

Those benchmarks are closely watched because Saudi crude pricing to Asia is linked to the average of Dubai and Oman quotes. A fall in spot premiums typically gives Saudi Aramco room to lower its monthly selling prices.

Premiums had surged to a record above $60 a barrel in March after the US-Israeli war involving Iran disrupted supplies through the Strait of Hormuz.

They later fell as global crude premiums eased and alternative supply flows increased.

China demand weighs on market

Chinese refiners have cut processing rates and crude imports, partly because of refining losses at elevated prices.

That weaker demand has added pressure on Middle Eastern grades, including Saudi crude.

The United States has also shipped more oil and fuel to help offset Middle East shortfalls, further easing concerns over supply availability.

Brent crude has fallen towards $100 a barrel, its lowest level this year, as talks between the US and Iran raised hopes of a possible agreement to end the conflict.

However, flows through the Strait of Hormuz remain below pre-war levels, keeping some supply risk in the market.

Shipping routes remain in focus

With restrictions affecting shipping through the Strait of Hormuz, Saudi Aramco has been using the Red Sea port of Yanbu to export Arab Light crude.

The use of alternative routes has helped maintain flows, though traders continue to watch Hormuz closely because of its importance to global energy supply.

What comes next

Market participants expect Saudi prices across grades to fall in tandem for July, reflecting weaker spot premiums and muted Asian demand.

The official prices, due around the fifth day of the month, will be watched for signs of how Saudi Aramco is balancing market share, refining margins and geopolitical risk in its most important export market.