Middle East benchmarks strengthened last month. Credit: Terry McGraw from Pixabay.

The world’s largest oil exporter, Saudi Arabia, may increase the official selling price (OSP) for its flagship Arab Light crude in May following a strengthening of Middle East benchmarks last month.

Industry sources told Reuters that the May OSP for Arab Light crude could rise by $0.20–0.30 a barrel from April. Arab Extra light may increase by $0.30–0.50 a barrel due to higher premiums from similar-quality Murban crude from Abu Dhabi.

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Robust demand in Asia caused the average premium for May ICE futures to Dubai swaps to rise by $0.58 to $1.73 (SR6.49) a barrel, according to Reuters data.

Oilfield maintenance in Saudi Arabia is ensuring supply remains tight and rising domestic consumption in the Middle East will contribute to the higher May OSPs for Saudi Arabia’s Arab Medium and Arab Heavy.

OPEC+ production cuts will also prompt higher prices. The members declared the extension of voluntary output cuts of 2.2 million barrels per day were necessary due to growing output outside of the group. When the decision was made at the beginning of March, Saudi Arabia agreed to extend its voluntary cut of one million barrels per day until the end of June, leaving its output at around nine million per day.

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Despite oil prices buoying through the turmoil of rising geopolitical tensions and Houthi attacks on Red Sea shipping, OPEC+ countries are concerned about sluggish economic growth.

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Reuters noted that Saudi Crude OSPs are usually set on the fifth of each month and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting nine million barrels per day of crude oil bound for Asia.

State-owned oil company Saudi Aramco calculates the crude prices based on recommendations from customers after working out the change in value of its oil over the past month.