Saudi Arabia, the world’s top oil exporter, is expected to reduce prices for most of its crude grades sold to Asia in October, following a decline in the Middle East’s Dubai benchmark last month, according to industry sources.
The official selling price (OSP) for Saudi Arabia’s flagship Arab Light crude in October is anticipated to decrease by 50 to 70 cents per barrel, based on a Reuters survey of five refining sources. This expected reduction aligns with the recent drop in Dubai price spreads.
The potential price cut also reflects weak refining margins, particularly in China, where low manufacturing output and a struggling property sector have reduced fuel demand. “Margins are bad now overall and worse in China,” one source noted, suggesting that oil demand in September, typically a strong month, might be weaker than usual this year.
Additionally, OPEC+ is set to increase output from October, with eight member countries planning to boost production by 180,000 barrels per day. This adjustment is part of a strategy to gradually ease the recent 2.2 million barrels per day production cut, while maintaining other cuts until the end of 2025.
Despite the anticipated cuts, two respondents believe the October OSP for Arab Light could remain stable, partly due to the Dubai benchmark strengthening in the last week of trading last month.
For heavier grades like Arab Medium and Arab Heavy, three of the five respondents expect October prices to decrease by less than 50 cents, supported by strong fuel oil demand. However, the other two predict price cuts between 60 and 80 cents per barrel.
Saudi Arabia typically releases its crude OSPs around the fifth of each month, setting a trend for Iranian, Kuwaiti, and Iraqi prices, and influencing about 9 million barrels per day of crude bound for Asia. Saudi Aramco, the state oil company, determines its crude prices based on customer recommendations and an assessment of changes in the oil’s value over the past month, taking into account yields and product prices.
As a policy, Saudi Aramco officials do not comment on the kingdom’s monthly OSPs.