Saudi Arabia, the world’s leading oil exporter, is likely to reduce prices for most crude grades sold to Asia in October, following a decline in the Middle East benchmark Dubai, according to industry sources. The expected price cuts range from 50 to 70 cents per barrel, reflecting weak refining margins in China and an increase in OPEC+ supply.
The October official selling price (OSP) for Saudi Arabia’s flagship Arab Light crude is anticipated to decrease by 50 to 70 cents per barrel, according to a Reuters survey of five refining sources. This price reduction is in line with the recent downward trend in Dubai price spreads observed last month.
Weak refining margins, particularly in China, are a significant factor driving these expected cuts. China’s sluggish manufacturing and property sectors have dampened fuel demand, leading to lower margins. One source noted, “Margins are bad now overall and worse in China,” adding that September, typically a peak month for oil demand, might disappoint this year.
In addition to weak margins, the anticipated increase in OPEC+ supply is also influencing the expected price cuts. Starting in October, eight members of the OPEC+ group are scheduled to boost output by 180,000 barrels per day as part of a plan to begin unwinding their recent output cuts of 2.2 million barrels per day. These cuts are expected to remain in place until the end of 2025.
However, not all analysts agree on the magnitude of the price cuts. Two of the five respondents believe that the Arab Light OSP for October may remain largely unchanged, citing a strengthening of the Dubai benchmark in the final week of trading last month as a possible reason.
For heavier crude grades like Arab Medium and Arab Heavy, the responses were mixed. Three of the five respondents expect prices to be reduced by less than 50 cents, supported by strong fuel oil demand, while the remaining two foresee price cuts of 60 to 80 cents per barrel.
Saudi Arabia’s crude OSPs, which are typically released around the fifth of each month, set the trend for prices from other major oil exporters in the region, including Iran, Kuwait, and Iraq. These prices influence approximately 9 million barrels per day of crude bound for Asia. Saudi Aramco, the state oil giant, sets these prices based on customer recommendations and by calculating the changes in the value of its oil over the past month.
As a matter of policy, Saudi Aramco officials do not comment on the kingdom’s monthly OSPs.