Saudi Arabia kept June prices for its benchmark Arab Light crude unchanged for Asian buyers, looking to defend market share amid stiff competition, while raising prices for Europe to reflect a price rally in rival grades in recent weeks.
OPEC's top producer has been pumping near record levels of around or over 10 million barrels per day in a fight for market share that began as prices plummeted in the second half of last year on a global supply glut.
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But the kingdom is approaching the peak of domestic oil use due to summer electricity demand. It needs to balance its own needs with those of customers across the globe who might ask for too much if it was priced too cheaply versus rival grades
Olivier Jakob from Petromatrix consultancy said Saudi prices for Asia were still very "accommodative for that destination" - probably the most important for Saudi Arabia as most of the future demand growth is set to come from China and India.
Traders had also expected Saudi prices for Asia to stay unchanged after two straight months of increases, when robust refining margins supported demand there.
"While Saudi Arabia has hiked adjustments for the last two months in a row, overall differentials vs. Dubai are still low in a historical comparison and buying interest remains high," JBC Energy said in a note.
State oil firm Saudi Aramco also kept prices for the United States broadly unchanged while most of the increases came in Europe.
"Europe has recently been a two-tier market with light/sweet grades under pressure due to the push from West Africa while heavier sour crude have been well supported by strong Urals. The OSPs are reflecting that," said Jakob.
Russia's Urals has rallied in recent weeks due to relatively short supply while light grades such as Azeri Light have plummeted due to strong competition with Nigerian oil.
JBC Energy said it expected Saudi domestic demand to surge to 750,000 barrel per day in June, up around 450,000 bpd from the start of the year due to the peak summer cooling demand.
"It is also possible that the kingdom's crude intake levels will surge on account of the new refineries, although we would expect less efficient refiners to run a little lower in order to keep overall crude export levels steady," it said.
JBC said that despite record high production Saudi Aramco had to somewhat limit strong buying appetite during its own peak domestic oil burning season.
That could be achieved by either through less attractive selling prices or by invoking operational tolerance rules - which means not allocating maximum quotes to term buyers.
Aramco has kept its June official selling price (OSP) for Arab Light grade to Asia unchanged at minus $0.60 a barrel to the Oman/Dubai average, it said on Tuesday.
The company raised its Arab Light OSP to Northwest Europe by 130 cents for June from the previous month at a discount of $2.65 a barrel to the Brent Weighted Average (BWAVE).
The Arab Light OSP to the United States was set at a premium of $1.55 a barrel to the Argus Sour Crude Index (ASCI) for June, up 20 cents from the previous month.