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Saudi Arabia will supply full crude oil volumes in September under contracts with Asian buyers, Reuters has reported, citing multiple unnamed sources.
The news comes days after the Kingdom raised its official selling prices for crude yet again and said it would extend its voluntary production cuts of 1 million barrels daily through September. Riyadh also said it might extend and/or deepen the cuts beyond the end of September.
Saudi Aramco raised the official selling price (OSP) for its Arab Light crude oil grade to Asia by $0.30 per barrel for the month of September, to $3.50 above the Oman/Dubai average, the company said earlier this month.
Aramco also raised the price of its Arab Light crude to Europe by $2 per barrel, but it left its crude to the United States the same at +$7.25 versus ASCI for the month of September, it said.
Despite this, sources from the oil trading industry believe shipments of Saudi crude to Asia, and specifically China, are about to increase. Per the Reuters report, September shipments could hit 50 to 50 million barrels, which would be a marked increase from August volumes of 38 million barrels.
Saudi Arabia’s voluntary cut, meanwhile, has pushed OPEC’s total lower, per the cartel’s latest monthly report.
According to the figures, Saudi Arabia saw its crude oil production slump by 968,000 bpd from June to average 9.021 million bpd in July, per OPEC’s secondary sources in the report. Due to Saudi Arabia’s voluntary unilateral cut, the Kingdom’s crude oil production has now fallen below the production of Russia, the key partner of OPEC in the OPEC+ alliance.
The cuts have so far worked in boosting oil prices. However, they may not have boosted prices enough. According to some analysts, Saudi Arabia needs Brent at $90 to finance its diversification plans, which means it would likely continue to keep a cap on supply.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com