Saudi Arabia, the world’s largest oil exporter, raised the price of most of its crude oil to Asian customers for the second month in a row in August, following the announcement of an additional output cut on top of an OPEC+ deal.
Saudi Arabia as Largest Oil Exporter
Saudi Aramco increased the official selling price (OSP) for August-loading Arab Light to Asia by 20 cents per barrel from July to $3.20 per barrel over Oman/Dubai quotes, according to a statement from the state oil giant.
The price increase was widely anticipated by the market, though some Asian refiners polled prior to Saudi Arabia’s pledge to extend the production cut expected a price cut of around 50 cents due to poor refining margins and competition from crude from other regions.
Saudi Arabia announced on Monday that it would extend its 1 million barrels-per-day (bpd) voluntary cut in oil production until August, with the option of extending it further.
Last month, the de facto leader of the OPEC+ group raised its July OSPs to Asia, shortly after unexpectedly pledging a 1 million bpd voluntary cut in July.
The higher cost of Saudi oil would put additional pressure on Asia’s already-thin refining margins, prompting refiners to seek alternatives from other Middle Eastern suppliers or from regions such as the United States and West Africa, given that the spread between Brent and Dubai-pegged oil has narrowed.
According to a report published on Tuesday by Renaissance Energy Advisors, Arab Light has proven to be the least competitive grade for Asian refiners, referring to refining margins in Singapore.
According to the statement, Saudi Arabia kept the price of Extra Light crude to Asia unchanged in August at $2.55 per barrel over Oman/Dubai quotes, but raised the OSPs for Arab Medium and Arab Heavy by 20 cents, reflecting more robust refining margins for fuel oil.
For the rest of the world, the top oil exporter raised its August Arab Light OSP to northwest Europe by 80 cents to $3.80 per barrel above ICE Brent.
Meanwhile, the OSP to the US was raised by 10 cents in August from the previous month to $7.25 versus the ASCI.
To read our blog on “2nd cargo of crude oil from Russia docked at Karachi port,” click here
