After 3 consecutive months of emerging crude oil costs, Saudi Arabia, the world’s largest oil exporter, is expected to make the first drop in its official promotional costs (PSO) since the OPEC Group began its record cuts in market production. costs in a context of falling demand.
Oil refineries and investors in Asia largely expect Saudi oil giant Aramco to reduce the value of its crude oil destined for Asia in September, as the oil recovery requires weakening refining margins and weakening Middle East oil benchmarks over which Gulf manufacturers set their values for Asia.
According to a Reuters survey of five Asian refineries, the sector expects Saudi Arabia to be worth its flagship Crude Arab Light for Asia in September through an average of $0.61 consistent with the barrel.
A Bloomberg survey of 8 Asian investors and refineries showed expectations, with an average forecast of a US$0.48 relief consistent with the barrel.
While increases in Saudi Arabia’s value over the past 3 months have signaled an increase in oil demand, and Middle East Benchmarks Dubai/Oman have strengthened as the source has hardened after OPEC cuts, expectations of a long-term decline in Saudi Arabia’s values are a sign that Demand Recovery is increasing and dragging Middle East benchmarks and refining margins downwards.
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The value of Saudi crude, which is regularly released around one-fifth of each month, defines the trend of value for Asia for other Gulf oil manufacturers such as Kuwait, Iraq, and Iran. The value of Saudi Aramco affects up to 12 million barrels consistent with the day (b/d) of crude from the Middle East bound for Asia.
The value of Saudi crude oil is also a telling sign of crude oil demand and market fundamentals and refining margins in the regions.
There are already symptoms that require a weakening and that excess is imminent. The design of Dubai’s market square changed in late July for contango, the scenario in which costs in the first month are lower than the costs in the coming months, indicating an oversupply of crude oil. Over the past week, Brent Brent’s futures curve has also shifted to spread as slow demand and us production decline. And OPEC weighs on the feeling of location in the market.
Refining margins in Asia, for jet fuel and gasoline, are weakening due to slowing demand. China’s fuel exports are also affecting regional margins.
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Refineries in India, for example, are now reducing processing rates because fuel demand, rising since April and the May lows, has slowed this month, as fuel costs are higher and parts of India are stuck locally, while the monsoon rainy season is also blocking economic activity and shipping refinery officials told Reuters this week.
Faltering demand, source input flow as OPEC mitigates cuts from August 1, weak market design, and still-low refining margins would possibly leave Saudi Arabia without a selection yet to meet visitors’ expectations and lower oil costs for the first time in 4 months.
By Tsvetana Paraskova for Oilichelin
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