Oil prices experienced a surge following Saudi Arabia’s unexpected decision to increase prices for its primary crude grade for Asian customers. This move signals confidence in the market’s capacity to absorb additional barrels from the Organisation of the Petroleum Exporting Countries (OPEC). West Texas Intermediate crude climbed by over 1 per cent, settling just under $US68 a barrel, reversing earlier losses. Brent crude also saw gains, settling above $US69 a barrel.
Saudi state producer Aramco will raise the price for Arab Light crude, its flagship grade, by $US1 a barrel to $US2.20 a barrel more than the regional benchmark for Asian customers in August. This pricing adjustment averted a potential downturn in oil prices, which had been threatened by the simultaneous decision of eight OPEC+ nations to increase supply more rapidly than anticipated. The increase will add 548,000 barrels a day in August, with further increases expected in September.
According to Ole Hansen, head of commodity strategy at Saxo Bank A/S, the decision to raise prices during the peak summer demand season suggests that physical markets remain tight. This indicates the additional barrels can be absorbed, at least for the time being. Hansen added that downside risks to crude appear contained in the short term. This price adjustment signals a strong demand outlook from one of the world’s largest oil producers.
