SINGAPORE: Saudi Arabia, the world's biggest oil exporter, may cut prices for most crude grades it sells to Asia in July, the first cut in five months, as Middle East benchmarks and margins for Asian refiners have weakened, refining sources said.

The July official selling price (OSP) for flagship Arab Light crude is expected to fall by 30 to 50 cents a barrel, a Reuters survey of five refiners showed, after hitting a five-month high in June.

The potential price reduction for Asia, which accounts for 82% of Saudi's oil exports, underscores the pressure faced by OPEC producers as non-OPEC supply continues to grow while the global economy faces headwinds.

The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, is likely to extend voluntary supply cuts at the June 2 meeting.

State oil giant Saudi Aramco is likely to reduce its OSPs after the first and third-month price spread for Middle East benchmark Dubai narrowed in backwardation by about 40 cents this month, said the sources who declined to be named as they are not authorised to speak to media.

Backwardation is a market structure where prompt prices are higher than those in future months, indicating tight supply.

Tight supply caused by sharply lower exports from Mexico and Abu Dhabi has eased after state energy firms Pemex and ADNOC reduced domestic intake of their own oil, the sources said. Additionally, Canada has started exporting heavy oil from its newly expanded Trans Mountain pipeline to Asia.

With supply tightness easing, one of the sources said the OSPs for Arab Medium and Arab Heavy should be reduced further.

In Asia, weak refining margins have curbed refiners' appetite for incremental supply, the sources said.

The average margin at a complex refinery in Singapore, the bellwether for Asian refiners, slipped under $3 a barrel in the past 15 days from $3.96 in April, LSEG data showed.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 9 million barrels per day (bpd) 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.

The company's officials do not comment on the kingdom's monthly OSPs as a matter of policy.

Below are expected Saudi prices for July (in $/bbl against the Oman/Dubai average): JUNE Change est.JULY OSP Arab Extra Light +2.80 -0.50/-0.30 +2.30/+2.50 Arab Light +2.90 -0.50/-0.30 +2.40/+2.60 Arab Medium +2.35 -0.50/0.00 +1.85/+2.35 Arab Heavy +1.60 -0.50/0.00 +1.10/+1.60 Source: Reuters, trade (Reporting by Florence Tan; Editing by Varun H K)