Saudi Arabia, the world’s largest oil exporter, has raised the prices of most of its crude grades for September, signaling that the demand recovery from the pandemic is still robust.
Saudi Aramco hikes prices for Asia and US
The state-owned oil giant Saudi Aramco announced on Sunday that it would increase the official selling prices (OSPs) of its Arab Light crude oil by 30 cents per barrel for Asian customers and by 20 cents per barrel for US buyers. The price hikes were in line with market expectations, as the benchmark Dubai crude oil has been trading at a premium to Brent in recent weeks, reflecting strong demand from Asia.
The OSPs for Asia are now at a premium of $1.70 per barrel to the Oman/Dubai average, while the OSPs for the US are at a premium of $1.35 per barrel to the Argus Sour Crude Index (ASCI). Both are the highest levels since January 2020, before the coronavirus outbreak.
Saudi Aramco also raised the prices of its Arab Extra Light and Arab Medium grades for Asia and the US, but lowered the prices of its Arab Heavy grade for both regions. The price cuts for the heavy crude were likely due to lower demand from China, which has been importing less oil from Saudi Arabia and more from Iran, despite US sanctions.
Saudi Aramco cuts prices for Europe amid Delta variant concerns
In contrast to its price increases for Asia and the US, Saudi Aramco reduced the prices of all its crude grades for Europe, reflecting weaker demand from the continent amid rising cases of the Delta variant of Covid-19. The OSPs for Europe are now at a discount of $1.90 per barrel to the ICE Brent crude oil, down 10 cents from August.
The price cuts for Europe were also in line with market expectations, as the Brent-Dubai spread has widened in recent weeks, making European crudes more attractive for Asian buyers. The spread reached $4.24 per barrel on Friday, the highest since May 2019.
Saudi Arabia’s pricing decisions are closely watched by other oil producers and traders, as they set the tone for the global oil market. The kingdom is the de facto leader of the OPEC+ alliance, which has been managing oil supply since 2016 to balance the market and support prices.
OPEC+ sticks to output plan despite US pressure
The OPEC+ group, which includes Russia and other non-OPEC allies, agreed in July to increase its collective output by 400,000 barrels per day (bpd) each month from August until December, when it will reach its pre-pandemic level of 37.5 million bpd. The group also extended its cooperation agreement until the end of 2022.
The decision came after a brief standoff between Saudi Arabia and the United Arab Emirates (UAE), which wanted to raise its own production quota. The dispute was resolved after the UAE agreed to a slightly higher baseline for calculating its cuts from May 2022.
The OPEC+ output plan has faced criticism from the US, which has urged the group to pump more oil to ease pressure on consumers and the global economy. The White House said last week that it was “deeply concerned” by OPEC+’s failure to produce enough oil and that it was engaging with relevant parties to address the situation.
However, OPEC+ has maintained that it is doing enough to support the market and that it is ready to adjust its policy if needed. The group’s Joint Ministerial Monitoring Committee (JMMC), which oversees compliance with the deal, is scheduled to meet on Wednesday to review the latest developments.
