Saudi Aramco cut the price of its main oil grade to buyers in Asia after OPEC+ continued with its outsized output increases for a third month.
The Saudis led the producer group over the weekend in agreeing to raise production by 411,000 barrels a day in July, a third straight month of outsized hikes. In tandem with US President Donald Trump’s trade war, the supply increases have helped drive benchmark oil prices about 12% lower in London since early April.
State producer Aramco will cut the price for Arab Light crude, its flagship grade, by 20 cents a barrel to $1 a barrel more than the regional benchmark for Asian customers, a price list seen by Bloomberg shows. The decrease is nevertheless smaller than a 35-cents-a-barrel reduction anticipated in a survey of refiners and traders.
The company raised the price of exports of the grade to the US by 10 cents a barrel in July from a month ago, while also increasing the prices for all grades to North West Europe and to the Mediterranean by $1.80 a barrel.
After surprising markets in April with the announcement of a bigger-than-planned output hike, the Saudis have kept pressing for more oil. The step aims to win back market share and takes away some of the advantage of a handful of OPEC+ members who’ve overproduced. Russia, which at times has exceeded its quota, was among those pushing for a more moderate supply hike in July.
Refiners have continued to enjoy healthy margins for products as many countries move into a higher summer demand period.
Still, crude stockpiles are starting to increase, indicating supply is outweighing demand, and refinery profits slipped at the end of last month.
“There must be enough confidence in Asian demand to limit the discount as they prepare to increase output,” said Harry Tchilinguirian, head of research and analytics at Onyx Commodities Ltd. “The actual amount of extra supply from voluntary-cut unwinds is going to come in much lower than the cumulative 1.2 million barrels a day of the three unwinds” as domestic crude demand increases seasonally in Saudi Arabia.
The Organization of the Petroleum Exporting Countries and its allies were already producing well above their quota levels before the unwinding, and only some member nations — including Saudi Arabia and the United Arab Emirates — have the ability to meaningfully push output higher, he added.
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