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The majority of crude oil prices for Asian clients will climb for the second month in a row, according to Saudi Arabia, the top oil supplier in the world. This comes after the decision to add another output cut to the existing OPEC+ agreement.
Saudi Arabia Hikes Crude Oil Prices: According to a Saudi Aramco release, the official selling prices (OSP) for August-loading Arab Light to Asia climbed by 20 cents per barrel from July to reach $3.20 per barrel over Oman/Dubai quotes.
Due to poor refining margins and competition from other local crude oil suppliers, several Asian refiners, according to a Reuters survey, projected a price reduction of about 50 cents despite the market’s general expectation of the price increase.
Implications for Asian Refining Margin
Saudi Arabia announced earlier this week that it would keep the option open to prolong its voluntary oil output limit of 1 million barrels per day (bpd) through August.
The de facto OPEC+ leader boosted its July OSPs to Asia last month, shortly after making the unexpected commitment to voluntarily cut output by 1 million bpd in July.
The more expensive Saudi oil might put extra pressure on Asia’s already thin refining margins, leading refiners to look for alternatives from other Middle Eastern suppliers or areas like the United States and West Africa, particularly given how little difference there is now between Brent- and Dubai-pegged oil.
Saudi Arabia upped the OSPs for Arab Medium and Arab Heavy by 20 cents, reflecting more solid refining margins for fuel oil, but keeping the price for Extra Light crude to Asia at $2.55 a barrel over Oman/Dubai prices in August.
Saudi Arabia increased the price of its August Arab Light OSP to northwest Europe by 80 cents to $3.80 a barrel over ICE Brent in other areas. Additionally, it boosted the OSP to the US by 10 cents in August compared to July, to $7.25 vs ASCI.