Saudi Arabia raised oil prices for its biggest market in Asia by more than expected as demand rises with the region’s main economies easing coronavirus restrictions. International benchmark Brent crude was trading at $120.38 per barrel at for a 0.55% increase after closing the previous session at $119.72 a barrel. The increase for July shipments resumes a streak of hikes that started in February and was only broken when state producer Saudi Aramco cut prices from record levels for this month. American benchmark West Texas Intermediate was at $119.53 per barrel at the same time for a 0.55% gain after the previous session closed at $118.87 a barrel.
Aramco raised its key Arab Light crude grade for Asian customers by $2.10 a barrel from June to $6.50 above the benchmark it uses. The market was expecting a boost of $1.50, according to a Bloomberg survey of refiners and traders. Saudi Arabia, the world’s top oil exporter, raised the oil prices for its Asian customers as several economies in the region removed coronavirus restrictions, putting supply pressure on prices amid a boosting demand in the region versus limited supply. Crude has climbed more than 50 percent this year to almost $120 a barrel.
The market has tightened as flows from Russia drop due to US and European sanctions. In addition, Asian countries such as China and Singapore are ending lockdowns that crimped demand in the past two or three months. Saudi Arabia’s decision came after the 23-member OPEC+ group agreed to increase its oil supply by around 50% from July, pushing the Brent oil price over $120 a barrel.
In some places “the demand rebound is quite something,” Mike Muller, head of Asia at Vitol Group, said Sunday on a podcast produced by Dubai-based Gulf Intelligence. “A lot of the south-eastern Asian countries, where I’m based, are very much exceeding expectations in terms of road-transportation demand. And try buying an air ticket in Singapore in the summer holidays. It’s tough.” On Thursday, OPEC+ ministers decided to add 648,000 barrels of oil per day to the market in July and August, up from 432,000 in recent months. Relieving supply concerns, Iraq said on Friday that its oil production would reach 4.58 million barrels daily in July and August.
The country’s economy is heavily dependent on crude oil exports, which provide more than 90% of the country’s revenue. The lack of supply comes as the market faces strong demand across most major regions, Australia and New Zealand Banking Group (ANZ) commodity strategist Daniel Hynes said in an e-mailed note.
Still, most analysts said the group is unlikely to meet its targets because many members, even aside from Russia, are struggling to pump more. Saudi Arabia and the United Arab Emirates are about the only OPEC+ nations with significant spare capacity. Saudi Arabia spends more than 60percentt of its crude exports to Asia, with China, Japan, South Korea, and India being the biggest buyers.
