SINGAPORE- Middle East crude benchmarks weakened on Thursday with traders waiting for Saudi Arabia to announce its official selling prices (OSPs) for February.

SAUDI OSP PREVIEW: Saudi Arabia is expected to cut February prices for heavier crude grades sold to Asia due to weaker fuel oil margins, respondents to a Reuters survey said. 

Weak refining margins and an expected drop in Asia's crude demand during second-quarter refinery maintenance were also factors that may prompt Saudi Arabia to cut prices in February, the respondents said.

The OSPs for Arab Medium and Arab Heavy crude grades are expected to fall by up to 50 cents a barrel in February from the previous month, according to the four refiners participating in the survey.

"Arab Heavy was too expensive in the past few months," said one of the respondents who expected a price cut of 50 cents.

Typical margins at a complex refinery in Singapore averaged about $2.84 a barrel in December, the lowest since August 2013, data on Refinitiv Eikon showed.

A 15-cent drop in the price spread between the first and third month DME Oman crude futures may also prompt Saudi Arabia to lower OSPs, the respondents said. DME Oman accounts for half of the underlying Saudi OSP benchmark for Asia.

For light grades, two of the respondents expect the February OSP for flagship Arab Light crude to drop by 20-30 cents to keep Saudi oil competitive against rising U.S. shale oil supplies.

The same respondents also expect a 20-50 cent cut for the February Arab Extra Light OSP.

 

REFINERY

Indian state-owned fuel retailers have stopped absorbing a government-mandated cut of 1 rupee (0.014 U.S. cents) a liter in their marketing margins on the sale of petrol and diesel due to a steep fall in global oil prices, said M K Surana, chairman of one of the three companies, Hindustan Petroleum Corp Ltd.

 

NEWS

U.S. Gulf Coast crude grades rose on Wednesday as the WTI-Brent spread widened and as a new report showed oil stockpiles in Texas shrank over the past week, traders said. 

Total said on Wednesday it had started production from the Egina oilfield off Nigeria's coast, part of a shift by the French energy firm towards deepwater oil and gas projects to its drive cashflow. 

High-sulphur fuel oil (HSFO) volumes traded in S&P Global Platts' Singapore price assessment process were nearly halved in 2018 from the previous year, signs of a market shift ahead of tougher global marine fuel rules coming in 2020. 

(Reporting by Florence Tan; Editing by Subhranshu Sahu) ((Florence.Tan@thomsonreuters.com; +65 6870 3497; Reuters Messaging: florence.tan.thomsonreuters.com@reuters.net))