Saudi Arabia, the world’s top oil exporter, has raised prices for the majority of its crude oil to Asian customers for the second consecutive month in August. This move comes as an extension of an additional output cut on top of a broader OPEC+ agreement.
Saudi Arabia Increases Crude Oil Prices
According to individuals familiar with the matter, state-owned Saudi Aramco has increased the official selling prices (OSP) for Arab Light crude loaded in August to Asia by 20 cents per barrel, reaching $3.20 per barrel over Oman/Dubai quotes.
Market analysts largely anticipated this price hike. However, prior to Saudi Arabia’s announcement of the production cut extension, some Asian refiners surveyed by Reuters expected a reduction in prices of around 50 cents per barrel due to poor refining margins and competition from crude oil sourced from other regions.
On Monday, Saudi Arabia declared its intention to prolong its voluntary cut in oil production of 1 million barrels per day (bpd) until August. The country also left the possibility open for further extension of this reduction. Last month, the de facto leader of the OPEC+ group raised its July OSPs to Asia following an unexpected commitment to a voluntary cut of 1 million bpd.
The increased cost of Saudi oil is likely to add pressure to already slim refining margins in Asia. Consequently, refiners may explore alternative options from other Middle Eastern suppliers or regions such as the United States and West Africa. This consideration arises as the spread between Brent- and Dubai-pegged oil has narrowed. A report from Renaissance Energy Advisors, published on Tuesday, highlights that Arab Light has shown less competitiveness among Asian refiners, specifically concerning refining margins in Singapore.
In August, Saudi Arabia maintained the price of Extra Light crude to Asia at $2.55 per barrel over Oman/Dubai quotes. However, the country raised the OSPs for Arab Medium and Arab Heavy by 20 cents per barrel to reflect stronger refining margins for fuel oil, as reported by the sources.