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Saudi ups June crude OSPs to Asia; cuts Europe, US

But the top oil exporter has cut the price of all its June-loading crude oil to customers in Europe and the United States, despite strong refining margins in those regions too, they said.

The hike in Asian prices was on the higher end of market expectations and some lighter grades topped forecasts.

Naphtha-rich Super Light’s premium rose to a record of $7.75 a barrel to Oman/Dubai average in June, topping the previous all-time high of $7.60 premium in October 2006, traders said.

“That only reflects high naphtha prices,” a trader said. ”(Saudi Arabia) must be looking mainly at the fluctuations in the products’ crack spreads with Dubai.”

Arab Light for June was set at a premium of 55 cents to the Oman/Dubai average, up 40 cents from May and the highest level since an 85-cent premium paid for August 2005.

Arab Medium and Heavy grades were both at their highest since April 2006, while Extra Light’s premium of $3.65 a barrel was the strongest since August 2006.

Traders polled by Reuters had expected the heaviest grades -- Arab Heavy, Arab Medium and Arab Light -- to rise by an average 30 cents a barrel, putting them at their highest since April 2006, thanks in part to OPEC production curbs imposed over the past six months.

“There has been an improvement in most products in Asia. And this is also the result of the cuts. Demand is higher,” a trader said.

Saudi Arabia has cut export volumes to Asia by 9-10 percent for April and May, to comply with an OPEC pledge to cut daily supplies by 1.7 million barrels from Feb. 1.

Government data compiled by Reuters showed last week that Saudi Arabia cut export volumes to North Asia -- China, South Korea and Japan -- by 11 percent in the first quarter of 2007 versus the same period last year.

Cuts Europe, US prices

Traders were caught unawares by the cut in prices of Saudi crude to Europe and the United States despite healthy product demand in those regions, especially for gasoline and naphtha ahead of the summer driving season.

“I have to admit I am surprised,” a trader with a European company said.

Saudi Aramco cut prices to Europe by 20 to 70 cents a barrel, with flagship Arab Light crude set at a $4.40 discount to BWAVE, down 60 cents from the May price.

Saudi Aramco cut prices to the US by a wider $1.40-1.65 a barrel.

Arab Light was set at a $3.10 discount to WTI, down by $1.65 from May.

Prices for Sidi Kerir were set at parity with prices at Ras Tanura for June, against a 35-cent premium for May, as Saudi Arabia aimed to keep its crude competitive in the Mediterranean, a trading source said.

The same competitive pressure may explain why Saudi Aramco cut prices at Ras Tanura and to the US

Saudi crude faces rivalry in Europe, where it competes with Russian sour Urals grade and in the US, where it vies with US Mars crude, Canadian and South American grades.

The following table details Saudi crude prices in dollars per barrel for June and May.

Saudi term crude supplies to Asia are priced as a differential to the Oman/Dubai average:

JuneMayChange *June OSP Reuters forecast

Arab Super Light +$7.75 +$7.20 +$0.55n/a

Arab Extra Light +$3.65 +$3.20 +$0.45+3.10/+3.60

Arab Light+$0.55 +$0.15 +$0.40+0.25/+0.45

Arab Medium-$2.00 -$2.30 +$0.30-2.15/-2.00

Arab Heavy-$4.50 -$4.75 +$0.25-4.60/-4.45

* June OSP Reuters forecast were traders’ forecasts shown in a Reuters poll on Thursday.

Prices at Ras Tanura for Saudi oil destined for Europe are set against the ICE Brent crude weighted average (BWAVE):

JuneMayChange

Arab Extra Light -0.65+0.05-0.70

Arab Light-4.40-3.80-0.60

Arab Medium-5.75-5.50-0.25

Arab Heavy-7.40-7.20-0.20

Prices at Sidi Kerir for Saudi oil destined for Europe are set against BWAVE:

JuneMayChange

Arab Extra Light -0.65+0.40-1.05

Arab Light-4.40-3.45-0.95

Arab Medium-5.75-5.15-0.60

Arab Heavy-7.40-6.85-0.55

Saudi term crude supplies to the United States are priced as a differential to US crude benchmark West Texas Intermediate:

JuneMayChange

Arab Extra Light +0.10n/an/a

Arab Light-3.10-1.45-1.65

Arab Medium-5.20-3.60-1.60

Arab Heavy-7.30-5.90-1.40