Saudi Arabia raised the price of its flagship crude to Asia for a third consecutive month, as the kingdom tries to tighten the oil market to prevent a global surplus.
State-owned Saudi Aramco raised the June official selling price of Arab Light crude for customers in Asia by 90 cents to US$2.90 a barrel above the regional Oman-Dubai benchmark, according to a price list seen by Bloomberg. It compares with an increase of 60 cents forecast in a Bloomberg survey of six refiners. Prices for other lighter and heavier varieties were also increased from May.
The hike highlights Saudi Arabia’s efforts to keep the market tight amid fading war risk in the Middle East, which has helped drive oil prices in London lower. Most traders and analysts surveyed by Bloomberg predict that the Organization of the Petroleum Exporting Countries and its allies will extend their output curbs, potentially to the end of the year.
Despite the tension between Iran and Israel, the outlook for oil seems to be darkening amid concerns over China’s economy, and ample crude supplies from non-OPEC countries such as the US. There are also signs of weakening demand for diesel, a fuel that’s considered a barometer for economic activity.
The higher-than-expected price increase for Asia, the biggest importing region, is likely to crimp refining margins that are slightly above the five-year seasonal average. A sharp drop in returns from making diesel has already prompted some refiners in South Korea to make modest cuts to operating rates.
Customers in Europe also saw big increases in the kingdom’s prices for June sales, while rates for the US were largely steady.
OPEC pumped 26.81 million barrels a day in April, about 50,000 a day less than the previous month, according to a Bloomberg survey. As a result, supply curbs agreed by the group and its allies at the start of the year to avert a surplus are still unfinished. Iraq and the United Arab Emirates continue to pump several hundred thousand barrels a day above their agreed limits.