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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Saudi Arabia Could Set Trend For Higher Oil Prices In June

Saudi Arabia is likely to increase the price for its oil bound for Asia in July, a Reuters survey of five refinery sources showed on Monday. 

This is the second consecutive month for oil price hikes in Saudi Arabia, which come on the back of reduced supply out of the Middle East region due to the OPEC+ cuts.

The pricing of Saudi crude, typically released around the fifth of each month, generally sets the trend for the pricing for Asia of other Gulf oil producers such as Kuwait, Iraq, and Iran. The pricing of Saudi Aramco, the Kingdom’s oil giant, affects as much as 12 million barrels per day (bpd) of Middle Eastern crude grades going to Asia.

According to the Reuters survey, refiners in Asia expect Saudi Arabia to raise the price for its flagship Arab Light crude grade for July by $3.80 per barrel on average. 

In June, Arab Light is sold in Asia at a $5.90 a barrel discount to the Oman/Dubai average, after last month Saudi Arabia raised the price for all its crude oil grades to all regions for June in a move that analysts saw as the start of demand recovery. The price of Arab Light for June was raised by $1.40 a barrel from May. Asian refiners had not expected the increase in Saudi prices for June—they were predicting that the Kingdom would cut the price of its oil. 

For July, the refinery sources polled by Reuters expect Saudi Arabia to lift the prices for all its crude grades, especially Arab Extra Light, compared to the heavier grades. 

Still, refining margins in Asia have worsened in recent weeks because of the stronger Dubai/Oman benchmark prices that increase import costs. While expectations are that the Saudis will raise prices, the increase may not be by much because of the still weak refining margins, according to the Reuters survey.  

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on June 01 2020 said:
    If indeed Saudi Arabia does raise the price of its Arab Light crude to Asia for July delivery, it will be a good sign that oil prices are headed upward with the accelerating global oil demand and also a vote of confidence by the world’s largest exporter of oil.

    Still, Saudi Arabia would be clawing back part of the big discounts it made during its oil price war with Russia. It could also be an astute move to sell more of its light crude in China at a time of escalating tensions between the US and China and the threat of reciprocal tariffs affecting US energy exports to China.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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