Crude prices continued to be supported, at 83.5 $/b on early Monday, as the OPEC saga ended on Friday with Saudi official selling prices being disclosed for the month of December. Surprisingly, The Saudis hiked crude differentials to Asia by 1.4 $/b against the Oman/Dubai average, one of the highest monthly hikes on record, in clear opposition to consumers struggling with rising inflationary pressures. The move happened as consuming nations tried to tackle inflation with domestic measures. For instance, the Indian government had announced earlier last week that they would cut tax on petroleum products to ease consumer pain, with a 5 and 10 rupee cut for gasoline and diesel. The move from the Saudis clearly tries to transfer as much of the refiners’ margin to the Saudis. The wide Brent-Dubai differential, with the Exchange for swap contract crossing the 5$/b, also reduced the purchasing market power of Asian refiners, stuck with East of Suez crude as Atlantic basin crudes remain too pricey. The Atlantic basin’s distaste for sour crudes – given how costly it is to hydrotreat them to produce transportation fuels – also forced Saudis to remain quite competitive against Brent crudes, at 30 cents below Dated Brent.
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