Saudi Arabia raise oil prices more than expected amid Asia rebound

Saudi Arabia raised oil prices for its biggest market of Asia by more than expected as demand rises with the region’s main economies easing coronavirus restrictions.

The increase for July shipments resumes a streak of hikes that started in February and was only broken when state producer Saudi Aramco cut prices from record levels for this month.

Aramco raised its key Arab Light crude grade for Asian customers by $2.10 a barrel from June to $6.50 above the benchmark it uses. The market was expecting a boost of $1.50, according to a Bloomberg survey of refiners and traders.

The kingdom, the world’s biggest oil exporter, has raised prices for shipments sold under long-term contracts after futures surged following Russia’s invasion of Ukraine. Crude has climbed more than 50% this year to almost $120 a barrel.

The market has tightened as flows from Russia drop due to US and European sanctions. In addition, Asian countries such as China and Singapore are ending lockdowns that crimped demand in the past two or three months.

In some places “the demand rebound is quite something,” Mike Muller, head of Asia at Vitol Group, said Sunday on a podcast produced by Dubai-based Gulf Intelligence. “A lot of the south-eastern Asian countries, where I’m based, are very much exceeding expectations in terms of road-transportation demand. And try buying an air ticket in Singapore in the summer holidays. It’s awfully tough.”

OPEC+ agreed on Thursday to accelerate output increases. The 23-nation cartel, led by Saudi Arabia and Russia, said it would add 648,000 barrels a day to the market in each of July and August, about 50% more than its moves in recent months.

Still, most analysts said the group is unlikely to meet its targets because many members, even aside from Russia, are struggling to pump more. Saudi Arabia and the United Arab Emirates are about the only OPEC+ nations with significant spare capacity.

Saudi Arabia sends more than 60% of its crude exports to Asia, with China, Japan, South Korea and India being the biggest buyers.