“Unexpected Surge: Saudi Arabia Raises Prices on Oil for Upcoming Month”
(Bloomberg) —
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Saudi Arabia showed optimism on oil demand by unexpectedly raising prices for customers in its main market, Asia, while also raising prices in Europe and the US.
The moves came despite crude oil futures falling about 5% as rising interest rates weigh on consumption and counteract optimism about a recovery in China after the end of coronavirus lockdowns.
State-controlled Saudi Aramco raised most official selling prices for crude oil shipped to Asia in March. The company’s flagship product, Arab Light, was raised to $2 a barrel above the regional benchmark, up 20 cents from this month’s price.
It’s the first salary increase since September and goes against a Bloomberg survey of traders and refiners, which forecast a 20 cent cut.
“The OSP decision suggests the Saudis are seeing good demand in Asia,” Bob McNally, president of Rapidan Energy Group and a former White House official, told Bloomberg Television. China is likely to be “back in business in the second quarter.”
The kingdom raised all prices by $2 a barrel for European buyers, most by 30 cents for US buyers.
Many OPEC members have been sounding bullish on China over the past few days – perhaps the single biggest factor driving oil price movements this year.
The group’s secretary-general, Haitham al-Ghais, said he was more optimistic about China. And the head of Kuwait’s state-owned energy company told Bloomberg that consumption at the world’s largest crude oil importer was already on the rise and that it was “not a sudden upswing”.
Goldman Sachs Group Inc. expects Brent to surge back above $100 from $80 a barrel in the third quarter as China fully reopens its economy. Morgan Stanley has a similar forecast.
Saudi caution
Still, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said on Saturday the kingdom would be cautious about increasing oil production.
“I will believe it when I see it and then act,” Prince Abdulaziz said, referring to higher global oil demand.
Saudi Arabia is the world’s largest oil exporter. It sells about 60% of its crude oil supplies to Asia under long-term contracts, with prices reviewed every month. China, Japan, South Korea and India are the largest buyers.
Its movements are usually closely followed by other Persian Gulf producers such as Iraq and Kuwait.
Aramco Prices for March ($ per barrel):
Asia (opposite Oman/Dubai)
US (vs. ASCI)
North West Europe (opposite ICE Brent)
Mediterranean (opposite ICE Brent)
(Updates with analyst comments.)
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