Saudi Arabia Considers Lowering June Oil Prices to Asia

• Arab Light crude June OSP may fall to $7.50-$14.50 per barrel above Dubai/Oman averages, down from May's record high of $19.50 premium
• Dubai spot premiums collapsed to $9.17 from a historical high of over $60 in March, with April averaging $15.22 versus March's $38.30 average
• Chinese refiners, Saudi Arabia's top buyers, planned to purchase only 20 million barrels in May (a record low) after the May price hike, while facing weak margins from rising feedstock costs

Summary: Saudi Arabia Considers Lowering June Oil Prices to Asia

Saudi Arabia is expected to significantly reduce its official selling prices (OSP) for crude oil to Asia in June following weakening demand and easing spot market premiums, according to a Reuters survey of industry sources.

Key Price Changes

The flagship Arab Light crude June OSP may drop by $5-$12 per barrel from May's record levels, potentially pricing at a premium of $7.50-$14.50 above Dubai and Oman benchmarks. Similar reductions of $5-$12 per barrel are anticipated across all grades, including Arab Extra Light, Arab Medium, and Arab Heavy.

Market Dynamics

Spot market conditions have deteriorated sharply since late March. Dubai's cash premium to swaps plunged from a historic high of over $60 in March to just $9.17 on Monday. Dubai premiums averaged $15.22 per barrel in April, less than half of March's $38.30 average. The decline follows an initial surge driven by panic buying after supply disruptions from the U.S.-Israeli war on Iran.

Demand Weakness

China, Saudi Arabia's largest customer, ordered just 20 million barrels for May—the lowest volume on record—after May's price increase to record highs. Chinese refiners face margin pressure as feedstock costs rise faster than fuel prices. Replacement supplies from the U.S., West Africa, and other sources are arriving, while some refiners have resumed Iranian crude purchases under U.S. waivers.

Operational Impact

Saudi Aramco has shifted Arab Light exports through the Red Sea port of Yanbu after shipping restrictions through the Strait of Hormuz. Official June pricing is expected around the fifth of the month.