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Saudi Arabia raises crude prices in July to surprisingly high for Asian buyers


Saudi Arabia, the world’s top oil exporter, raised crude oil prices for Asian buyers in July to higher than expected levels amid concerns over tight supply and expectations of strong demand in summer.

The Official Selling Price (OSP) for Arab Light loaded in July to Asia rose $2.1 a barrel from June to $6.5 a barrel from Oman/Dubai quotes, just after a historic record recorded in May.

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This was much higher than most market forecasts for an increase of around $1.5. Only one in six respondents in a Reuters poll had predicted a jump of $2.

“The price surge is unexpected, especially for Arab Light. We are intrigued by the decision,” said an Asian oil trader.

The rise in state oil producer Saudi Aramco came despite an agreement by OPEC+ states to increase production by 648,000 barrels per day (bpd) in July and a similar amount in August in a bid to make up for losses Russian supplies. That compares to an initial plan to add 432,000 bpd per month over three months through September.

look | Saudi Arabia raises official oil price

But the increases have been split among member countries, including Russia and states such as Angola and Nigeria, which are struggling to meet their targets, raising fears that the actual increase in supply will is lower than the official plans.

Countries in the northern hemisphere, such as the United States, typically start their driving season in July, leading to increased demand for gasoline. China, the world’s top oil importer, is also reopening some cities like Shanghai after lengthy COVID-19 shutdowns.

“Demand is also very strong in this cycle and Saudi Arabia can afford to increase PSOs,” said another Asian oil trader.

Some demand for Saudi oil could be countered by continued flows of Russian oil to China and India, which have refused to blame Moscow for invading Ukraine and have increased purchases of bargain-priced Russian cargoes .

Read also | Saudi Arabia welcomes first foreign pilgrims after COVID-19 disruption

Moscow says it is carrying out a “special military operation” to disarm Ukraine and protect it from fascists. Ukraine and Western countries reject Russia’s claims as a pretext to invade.

Saudi Aramco also increased its OSP for European and Mediterranean buyers on Sunday evening, but kept US differentials unchanged.

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Post expires at 12:36pm on Thursday June 16th, 2022