Top oil exporter Saudi Arabia may raise prices of light crude grades it sells to Asia in December amid higher Middle East benchmarks, while a slump in fuel oil margins may lead to a deep price cut for its heavy grade, trade sources said.
The official selling price (OSP) for flagship Arab Light crude could rise by up to 20 cents a barrel in December from the previous month, three of the five refining sources said in a Reuters survey, to track a 26-cent gain in the Dubai benchmark.
The other two respondents expect prices to climb by 50 cents and $1 given a rise in refiners' margins for light products - naphtha and gasoline.
Asian buyers may also be lifting more Saudi term barrels after a recent surge in spot freight costs that curbed arbitrage supplies to Asia, traders said.
Naphtha margins quadrupled in October while spot premiums have hit the highest since 2013. Gasoline margins gained 18.3 per cent during the same period.
Saudi Arabia's production has also rebounded in October, recovering from the September 14 attack on its oil processing facilities.
For Arab Heavy crude, four respondents expect a price cut of at least $1 a barrel as fuel oil margins plunge ahead of a 2020 mandate by the International Maritime Organization for ships to reduce the sulphur content in their marine fuel.
Refiners' losses in producing a barrel of fuel oil more than doubled in October from the previous month.
Still, one respondent expected the OSP for Arab Heavy to slightly increase in December as demand for the grade in Asia remained robust.
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 barrels per day (bpd) 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. -- Reuters