Saudi Arabia, the top oil exporter, is likely to increase crude prices for Asian buyers in March, potentially reaching their highest levels in over a year. This comes after benchmark prices surged due to rising demand from China and India, coupled with U.S. sanctions affecting Russian supply, as reported by traders on Monday. 

According to a Reuters survey, the official selling price (OSP) for Arab Light crude could rise by $2 to $2.50 a barrel compared to February, with one source predicting a $3 increase across all grades. This means the March Arab Light price might hit a premium of at least $3.50 a barrel over the average benchmark prices of Oman and Dubai, up from February's $1.50 premium, marking the highest since January 2024.

A $2 increase in the premium would also represent the largest monthly jump since OSPs were set in August 2022. Other grades, including Arab Extra Light, Arab Medium, and Arab Heavy, are expected to see price hikes of at least $1.80, according to the survey.

These predictions align with the recent shifts in the market structure for first- and third-month Dubai prices. So far in January, the backwardation in the Dubai market has increased by $2.05 a barrel compared to the previous month. Backwardation occurs when current prices for a commodity are higher than future prices, indicating tight supply or increased demand.

However, some respondents noted that future price gains might be limited due to weak demand and narrow margins among Asian refiners. The Biden administration announced additional sanctions on January 10 targeting Russian producers, tankers, and insurers, which has disrupted supply from the world's second-largest producer and affected shipping availability. This situation has led Chinese and Indian refiners to look for alternative cargoes, driving up spot premiums for Oman and Dubai to their highest levels since November 2022.

OPEC+, responsible for approximately half of the global oil supply, decided in early December to delay the increase in oil production by three months, now set to commence in April, and to extend the complete reversal of production cuts by an additional year, pushing the timeline to the end of 2026. The organization is scheduled to convene on February 3, coinciding with U.S. President Donald Trump's calls for lower oil prices. Saudi Arabia typically announces its official selling prices (OSPs) for crude around the fifth of each month, which influence pricing trends for Iranian, Kuwaiti, and Iraqi oil, impacting roughly 9 million barrels per day destined for Asia.

Saudi Aramco, the state-owned oil company, determines its crude prices based on customer feedback and an assessment of the oil's value fluctuations over the preceding month, taking into account yield and product pricing changes. As a standard practice, officials from Saudi Aramco refrain from commenting on the kingdom's monthly OSPs.