(Corrects to insert dropped word in 3rd paragraph)
By Florence Tan
SINGAPORE (Reuters) - Top oil exporter Saudi Arabia is expected to raise crude prices to Asia in May to new highs, tracking strong gains in Middle East benchmarks after Western sanctions on Russia disrupted global supplies, traders said.
The official selling price (OSP) for flagship Arab Light crude in May could rise by $5 a barrel on average to reach nearly $10 a barrel above Oman/Dubai quotes, the grade's highest premium ever, a Reuters survey of seven refining sources showed.
Middle East spot crude premiums for May-loading cargoes hit records this month after buyers shunned oil from Russia, the world's top exporter of crude and oil products combined, for fear of European and U.S. sanctions over the Ukraine conflict.
Refiners' margins for middle distillates also hit all-time highs this month, as Russia cut refining output and diesel exports.
However, spot premiums have halved from peaks over the last week in muted trade, prompting some buyers to call for smaller hikes in Saudi oil prices. [CRU/M]
"Physical supply-demand balance is not that strong," said one respondent, adding that spot premiums for grades such as Murban had fallen dramatically.
Saudi Aramco (SE:2222) may also reduce price hikes for Saudi medium and heavy grades as Russian Urals crude is still heading into India, another respondent said.
Indian state refiners and Nayara Energy have bought several million barrels of Urals crude this month, drawn by low prices.
"We recommended lower OSPs as otherwise they (Saudi grades) will be too expensive next cycle," a third respondent said. Saudi crude OSPs, usually released around the fifth of each month, set the trend for Iranian, Iraqi and Kuwaiti prices, affecting about 9 million barrels per day (bpd) of crude bound for Asia.
State oil giant Saudi 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.
As a matter of policy, Saudi Aramco officials do not comment on the kingdom's monthly OSPs.
Below are expected Saudi prices for May (in $/bbl against the Oman/Dubai average):APRIL Change est.MAY OSP
Arab Extra Light +5.90 +4.80/+6.00 +10.70/+11.90
Arab Light +4.95 +4.00/+6.00 +8.95/+10.95
Arab Medium +4.90 +3.70/+5.15 +8.60/+10.05
Arab Heavy +3.55 +3.90/+5.10 +7.45/+8.65
Source: Reuters, trade