SINGAPORE: Top oil exporter Saudi Arabia may cut the prices of most crude grades to Asia in December as weaker-than-expected fuel consumption in China amid its strict COVID-19 rules put a lid on regional demand, trade sources said. State oil giant Saudi Aramco may lower the official selling price for its flagship Arab Light crude by about 30 to 40 cents per barrel in December, according to five respondents surveyed by Reuters. The price cut comes as China, the world"s largest crude oil buyer, extended stringent mobility controls to contain the highly transmissible Omicron variant after a surge in daily reported cases. Changes in the market structure for the Dubai Middle East oil benchmark typically guides how the Arab Light OSP is set. The premium of the first-month Dubai price over the third-month Dubai price narrowed by 59 cents during oil cargo trading in October versus the difference in September. That softening in the backwardation, or the structure when prompt prices are higher than for later delivery, suggests lower demand for oil. “Chinese demand is much weaker than expected,” said one respondent, adding that the market has already priced in the expectation that Chinese refineries will fully use their oil product export quotas. China in late September issued an additional 15 million barrels of new export quotas to boost its faltering economy, but some refineries have said the incentives to hike operational rates are low because of poor margins. read more The refining margin for a typical Asian refiner who processes the Middle Eastern crude fell to an average of $2.59 a barrel so far in October from $3.30 in September. But the respondents said that the OSP cut could be moderate given a tighter market supply. OPEC+ has planned to trim 2 million barrels per day of output from November to support oil futures prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising US interest rates and a stronger dollar. read more For other grades, three respondents expect the OSPs for Arab Medium and Arab Heavy to see a bigger reduction following a weaker refining cracks for fuel oil compared to middle distillate products such as diesel fuel and kerosene. , Saudi crude OSPs are released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 9 million barrels per day of crude bound for Asia. 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 December (in $/bbl against the Oman/Dubai average):