By Florence Tan
SINGAPORE (Reuters) - Top oil exporter Saudi Arabia is expected to raise April prices for most of the crude grades it sells to Asia, following a strengthening of Middle East oil benchmark Dubai over the past month, several trade sources said on Thursday.
The April official selling price (OSP) for flagship Arab Light crude could remain unchanged or rise by up to 35 cents a barrel from the previous month, four refining sources said in a Reuters survey.
This comes after backwardation in the first and third month Dubai price spread widened by 30 cents a barrel during February trade compared with the previous month, the sources said. Prompt prices are higher than those in future months in a backwardated market, implying stronger demand for spot oil.
Three of the four survey respondents expect prices to rise more for heavier grades than for lighter oils as output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and U.S. sanctions on Iran and Venezuela have tightened supplies.
Tighter heavy oil supplies and strong fuel oil margins pushed sour crude benchmarks Dubai and Oman above Brent this month.
The market was also driven up by an outage at the world's largest oilfield, Safaniya, which produces heavy Saudi crude. Saudi Aramco's chief executive said on Tuesday that the oilfield was back online.
Arab Heavy OSPs for April may rise as much as 50 cents a barrel, the sources said.
"They increased prices last month, and I'm not sure how much the supply disruptions from Iran and Venezuela are already priced in," said a source with a north Asian refiner.
"Medium grades may still go up on perceived tightness with Iran and Venezuelan sanctions, although at the end of this month's trading, there were still plenty of cargoes around."
Light grades, though, remained under pressure from weak margins for naphtha and gasoline. Light sour crudes, in particular, have been out-priced by a large influx of similar grades from Europe and the United States.
The respondents expect Arab Extra Light's April OSP to rise by 20 to 25 cents a barrel. Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 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.
Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.
(Reporting by Florence Tan; Editing by Tom Hogue)