Amid expectations of strong demand this summer and tight supply, Saudi Arabia raised July prices for its crude in most regions except the US.
Prices have risen the most for Asian buyers. Saudi Arabia raised the July official selling price (OSP) for its flagship Arab Light crude to Asia by $2.1/bbl from June, a $6.5/bbl premium above the Oman-Dubai benchmark it uses. The increase was well above the $1.5/bbl rise forecasted by most market analysts.
Oil demand in Asia is expected to increase. Saudi crude will be particularly popular with Asian refiners such as Japan and South Korea, which shunned Russian oil after the Ukrainian invasion. Meanwhile, China, the world's largest oil importer, is expected to boost demand as it reopens some cities, including Shanghai, after a prolonged COVID-19 lockdown. However, some Asian demand for Saudi oil may be offset by continued Russian oil flows to India and China, which have been ramping up their purchases of Russian cargoes at bargain prices.
For the European market, the price of the Arab Light will also be higher. Saudi Arabia raised European buyers' prices for grades similar to Russia's Urals by $2.2/bbl to a $4.3/bbl premium over Brent.
Prices for US customers were kept unchanged for the second straight month.
The increase in prices for July shipments resumes a streak of hikes that started in February, which was only broken when Saudi Aramco cut June prices from record levels.
The price increase also followed the decision by the Organization of Petroleum Exporting Countries and allies (OPEC+) to boost output for July and August by 648,000 b/d, or 50% more than previously planned (OGJ Online, June 2, 2022).