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Saudi Arabia may hike its official selling price for crude oil sent to Asia for the second month in a row to take advantage of strong premiums for Middle Eastern oil grades and record-high distillate margins, Reuters has reported.
The price for the Kingdom's flagship grade, Arab Light, could cost $2.40 per barrel more in August, according to sources from the refining industry that Reuters polled this week.
"Refining margins are very solid and we expect demand to stay robust in the near term," the sources said.
Saudi Arabia raised its official selling price for July deliveries as China began to reopen after the latest series of Covid-related lockdowns amid strong demand for middle distillates that pushed refiners' margins to a record high.
The price hike for the flagship Saudi grade for July deliveries to Asia was $2.10 per barrel, bringing the total premium of Arab Light to $6.50 per barrel over the Oman/Dubai benchmarks.
Meanwhile, supply on a global level remains tight and is getting even tighter. Libya just announced it would be suspending exports from a key oil terminal as its political crisis continues raging, and Ecuador said earlier this week it might have to suspend all oil production amid anti-government protests.
Meanwhile, it has emerged that the UAE and Saudi Arabia—the OPEC members thought to have the most spare oil production capacity—may actually be much closer to the maximum they can produce than previously believed.
Saudi Arabia will likely announce its official selling prices for August after today's OPEC+ meeting. Changes in the policy of the extended cartel are not likely after last month the members agreed to increase their monthly additions to total output from about 430,000 bpd to 648,000 bpd in both July and August. However, OPEC so far continues to be incapable of adding even the initial 430,000 bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.