Saudi Arabia issued big price increases for its crude in Europe and the Mediterranean, while unexpectedly raising the cost of barrels in Asia, a move that risks choking demand for the kingdom’s barrels.
State-owned Saudi Aramco raised prices for all grades in the US, northwest Europe and the Mediterranean compared with July, according to a price list seen by Bloomberg. It also raised its Arab Light prices in the key demand region of Asia, contrary to expectations in a Bloomberg survey.
Official selling prices in Europe rose by 80 cents a barrel, far outstripping increases in the US and Asia. Meanwhile, Arab Medium crude in the Mediterranean settled at a record premium of $3.20 a barrel, while Arab Light was the highest since September at $3.50 above its benchmark.
Despite receiving the smallest rise in the price of Arab Light barrels, US shipments settled for the biggest OSP since at least 1999. The company raised its flagship Arab Light crude for Asia by just 20 cents, to a premium of $3.20 a barrel.
Almost all traders and refiners polled by Bloomberg ahead of the kingdom’s announcement earlier this week that it would extend its previously implemented 1 million bpd supply cut until August had not predicted any change from price during the previous month. Aramco had already raised prices for all its grades in Asia during July.
Aramco’s July increases led at least two major European refiners to cut their Saudi orders. Raising prices by 80 cents across all grades in northwest Europe and between $1.00 and $1.10 for Mediterranean destinations risks further suppressing demand for Saudi crude.
The kingdom’s effort to prop up oil prices is being helped by OPEC+ ally Russia, which pledged a 500,000 bpd cut in exports for August, despite that announcements so far have had a soft impact on benchmark futures. Asian buyers may look elsewhere for alternative supplies if curbs deprive them of barrels or if Middle Eastern cargoes are deemed expensive.
Aramco sells about 60% of its crude in Asia, with its biggest buyers in China, Japan, South Korea and India. Exported cargoes are mostly under long-term contracts and the prices of these barrels are reviewed every month.
–With help from Sharon Cho.
