Saudi July 2020 Official Selling Prices (OSPs) - Asian refiners won't be happy

Saudi Arabia is returning to the strategy developed during previous production cuts; raising OSPs alongside with production cuts to maximise its total revenue. The increase in Saudi OSPs indicates a growing confidence that the global crude market is rebalancing from the coronavirus pandemic. Higher Saudi OSPs will further weaken the refining margins in Asia Pacific, where we expect a prolonged recovery in the refining margins as high products inventories need to be drawn down. Weak refining margins from a narrow crude advantage adds support to the projection that Asian crude runs are to lag demand recovery through H2 2020.