The world's top oil exporter also raised prices to Europe but cut the OSPs sharply for all its crude supplies to the United States. For Asian customers, Arab Heavy was set at a discount of US$3.60 (HK$28.08) a barrel to the Oman/Dubai average, up 70 percent from August and at the strongest level since July 2005, exceeding the top end of forecasts in a survey last week.

"Refiners in Asia are all after medium and heavy crudes. It's very economical for them now," a seller said, referring to the relatively cheaper heavy crude grades compared with lighter Brent-linked crudes.

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The front-month Brent/Dubai Exchange of Futures for Swaps stood at US$5.35/5.40 a barrel yesterday against around US$3.60 a month ago, making it more expensive for refiners to buy Brent-related crude from Europe.

Heavier grades also drew support from a strong fuel oil crack last month. The front-month fuel oil crack rose to an average of US$10.96 a barrel below Dubai swaps in July, against a US$11.44 discount in June, and has extended those gains to near minus US$8.

Arab Medium and Arab Light grades for Asia were raised by 50 US cents and 20 US cents a barrel from August, also above market forecasts. The differential for Arab Extra Light for Asia was unchanged, while the Super Light crude OSP was cut by US$1 a barrel amid weakening naphtha prices.

Naphtha's premium to Brent crude futures fell to a seven-month low of US$100 a tonne last week - less than half the record high of US$226 touched in May - amid soft Asian demand and ample supplies from India.

Traders said the strong fuel oil crack pushed the differentials for heavier grades higher, but added that the Extra Light OSP should have been cut in line with the weak naphtha market.

"Saudi Arabia's move will help spot Middle East crude, such as rival Abu Dhabi's Murban whose premium may rise," said a trader with a Northeast Asia-based refiner.

The Saudi OSPs can influence spot sour crude demand, as high prices relative to the prevailing market may prompt refiners to limit loading volumes, though most buyers are locked in annual term liftings that leave them little room to adjust volumes.

In 2006, Saudi Arabia shipped 51.6 percent of its almost seven million barrels per day of crude exports to Asia.

Sources in Ningbo, meanwhile, said China's crude imports in July rose 7percent from last month to one million barrels a day, although it did not pump any of the oil into its strategic reserve, three port sources said yesterday. REUTERS