Saudi Arabia may hike its May crude official selling prices to Asia to record highs as Middle East oil became the world's most expensive after the US-Israeli war with Iran caused massive supply disruptions, according to a Reuters survey of industry sources.
The May official selling price (OSP) for flagship Arab Light crude, the country's most widely sold grade, may rise to premiums of $22.50 to $40.50 a barrel above the average of Dubai and Oman quotes, six sources said in the survey, $20 to $38 a barrel higher than the OSP for April.
The wide range of Saudi oil price forecasts reflects deep uncertainty among Asian buyers following severe price volatility as the war has limited shipping through the Strait of Hormuz, a key chokepoint for a fifth of the world's oil supplies.
It remains unclear when a ceasefire will be reached or when oil exports from Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, Qatar and Bahrain can resume through the strait.
Last month, Middle East high-sulphur crude benchmark Dubai rose to nearly $170 a barrel during trading in SP Global Platts Market on Close process. The Dubai cash price's premium to swaps averaged $38.30 a barrel in March, up from an average of 90 cents a barrel in February, Reuters data showed.
Saudi Aramco looks at the premium data for indications of the backwardation, or the market structure when prompt prices are higher than later supply, and uses that to help set its official selling prices.
Traders said the Dubai price rally was amplified by TotalEnergies' purchases during the market on close process after SP Global Platts suspended nominations of three crude grades that require transit through the Strait of Hormuz, leaving only Murban loading from Fujairah and Oman crude available for deliveries.
"It's difficult to tell how much Saudi will increase its May OSP by after the volatility in Dubai assessment, partly being pushed up by Total buying," said one of the survey respondents.
To offset export losses from the Gulf, Saudi Aramco has increased exports from the Red Sea port of Yanbu to 4.4 million barrels per day last week, data from analytics firm Kpler showed. Aramco allocated only Arab Light crude loading from Yanbu to Asian buyers in April.
May OSPs for other Saudi grades are also expected to move up in tandem, the survey respondents said.
Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about nine 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.
(Reporting by Siyi Liu in Singapore; Editing by Florence Tan and Christian Schmollinger)