SINGAPORE (Reuters) - Saudi Arabia, the world's top crude exporter, raised the prices for all the grades it will sell to Asia in May, increasing levels for the second straight month as robust refining margins supported demand in the region.

The OPEC producer kept output steady and cut prices sharply late last year in a fight for market share during a global supply glut.

Its ability to raise prices for April and May suggested its strategy was working, although stiff competition kept its flagship Arab Light at a discount to Oman/Dubai quotes, analysts said.

"Even though it's a slight increase, overall it's still a discount," said Shunling Yap, a senior oil and gas analyst at BMI Research.

"There is still competition for the Asia market, even though it is also a sign that some of the production elsewhere is less able to compete in the market right now."

Saudi Aramco raised its May price for its Arab Light grade for Asian customers by US$0.30 a barrel compared with April to a discount of US$0.60 a barrel to the Oman/Dubai average, it said on Sunday, in line with market expectations.

The price pales in comparison with the same month last year when Arab Light was sold at US$1.85 a barrel above Oman/Dubai quotes. The Oman and Dubai benchmarks are also down 50 per cent since then.

Elsewhere, Saudi Aramco dropped its Arab Light OSP to Northwest Europe by 20 US cents for May from the previous month to a discount of US$3.95 a barrel to the Brent Weighted Average (BWAVE).

The Arab Light OSP to the United States was set at a premium of US$1.35 a barrel to the Argus Sour Crude Index (ASCI) for May, down 10 US cents from the previous month.