https://finance.yahoo.com/news/saudis-biggest-oil-price-hike-171705876.html
(Bloomberg)
-- Saudi Arabia made some of the biggest price increases for crude
exports in at least two decades, doubling down on its strategy to
bolster the oil market after OPEC+ producers extended historic output
cuts.
The
steepest jump will hit July exports to Asia, state producer Saudi
Aramco’s largest regional market, according to a pricing list seen by
Bloomberg. Overall, the increases for Saudi crude erase almost all of
the discounts the kingdom made during its brief price war with Russia.
The
sharp price increases show that Saudi Arabia is using all the tools at
its disposal to turn around the oil market after prices plunged into
negative territory in April. As the price setter in the Middle East, the
increases in its official prices may be followed by other producers.
Tighter
crude supply is helping repair an oil market battered by the
coronavirus. Unprecedented output cuts led by the Saudis and Russia
boosted prices in May, and the OPEC+ group decided Saturday to extend
those limits through July. Brent crude, down 36% this year, has clawed
back some of its losses and ended trading on Friday at more than $40 a
barrel.
But
the profits that oil refiners make from processing crude into fuel are
struggling to keep up with the rising market, and the sharp Saudi price
hikes are likely to exacerbate that problem. Representatives for
refineries from Europe and Asia expressed concern and said the pricing
would crush margins.
Price War
Saudi
Arabia unleashed a price war in March when it slashed official selling
prices by the most in three decades. The kingdom took that drastic step
after failing to reach an agreement with Russia to extend production
cuts in the face of the pandemic’s destruction of oil demand.
After
Tweets, phone calls and top-level consultations, OPEC+ returned to
negotiations and hammered out the biggest output curbs in history,
pledging to take nearly 10 million barrels a day off the market. U.S.
production plunged by roughly 2 million barrels daily as low prices
drove producers to shut wells.
OPEC+
chose on Saturday to renew production limits at almost the same level,
instead of tapering them as planned at the end of June. Aramco, which
typically announces pricing on the fifth day of each month, had delayed
its July numbers until after OPEC+ members made their decision.
Saudi
Arabia sells its crude at a differential to oil benchmarks, announcing
every month the discount or premium it’s charging to global refiners.
The so-called official selling prices help set the tone in the physical
oil market, where actual barrels change hands.
With
China’s demand for crude now rising, the Saudis are raising prices. The
month-on-month increase in the official selling price for flagship Arab
Light crude to Asia, which accounts for more than half of Saudi oil
sales, is the largest in at least 20 years. Aramco raised Arab Light to
Asia by $6.10 a barrel to a premium of 20 cents over the benchmark.
It
raised July pricing for all grades to Asia by between $5.60 and $7.30 a
barrel. That compares with an expected increase of about $4 a barrel,
according to a Bloomberg survey of eight traders and refiners.
Buyers in the U.S., the Mediterranean region and Northwest Europe will also pay more for oil.
Story Link: Saudis Seek to Bolster Oil Rally With Price Boost as OPEC+ Cuts
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