By Florence Tan
SINGAPORE, Dec 1 (Reuters) - Top oil exporter Saudi Arabia is expected to raise the January price for its flagship Arab Light crude in Asia to the highest in more than three years to track a stronger Dubai benchmark, trade sources said on Friday.
Robust demand in Asia and continuing supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia are rebalancing global oil markets. The producers agreed on Thursday to extend those supply cuts to end-2018, a decision that pushed Brent above $64 a short time later.
A price hike would track a wider price spread between prompt and third month cash Dubai that rose 31 cents last month from October, trade sources said. Front-month Dubai is higher than those in future months, indicating strong demand for prompt oil.
The survey respondents also expect an increase of 50-60 cents in Arab Extra Light's OSP in January after naphtha margins surged last month to the highest since early 2016.
January price hikes for Arab Medium and Heavy grades were likely to be smaller than those for light grades as fuel oil cracks weakened last month, the respondents said.
One of the four respondents expected a price cut for Arab Heavy crude.
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.
Below are expected Saudi prices for January (in $/bbl against the Oman/Dubai average):
DEC Change est.JAN OSP
Arab Extra Light +2.45 +0.50/+0.60 +2.95/+3.05
Arab Light +1.25 +0.25/+0.40 +1.50/+1.65
Arab Medium +0.00 +0.10/+0.35 +0.10/+0.35
Arab Heavy -1.15 -0.15/+0.30 -1.30/-0.85
Source: Reuters, trade