RoydadNaft –  Top oil exporter Saudi Arabia is expected to slash crude prices for Asian buyers in January to the lowest in years, largely tracking a slump in Middle East benchmark prices last month, traders said on Monday.

The January official selling price (OSP) for flagship Arab Light may fall by 70 to 90 cents a barrel from December to at least a four-year low, six sources at Asian refineries said in a Reuters survey.

Backwardation refers to the market structure when prompt prices are higher than those in future months.

Arab Extra Light’s OSP is expected to fall in line with Arab Light, while some respondents expect to see larger price reductions for heavier grades – Arab Medium and Arab Heavy – as fuel oil margins have weakened, the survey showed.

One respondent hoped for larger price cuts for heavy grades, as Chinese refining margins were still very poor.

Still, the outcome of the OPEC+ meeting on Dec. 5 is expected to determine supply in early 2025 and may influence Saudi OSPs, traders said, with some expecting state oil giant Saudi Aramco to announce prices after the meeting is concluded.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day of crude bound for Asia.

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.

Below are expected Saudi prices for January (in $/bbl against the Oman/Dubai average):

Source: Reuters, trade