Emboldened by strong prompt demand amid tighter oil supply due to the U.S. sanctions on Venezuela and Iran, the world’s top oil exporter Saudi Arabia is expected to raise the prices of the crude grades it sells on its premium market, Asia, for July, trade sources told Reuters on Thursday.
If the Saudis do raise next week the official selling prices (OSPs) of all their crude oil grade selling in Asia, this would be the third consecutive month in which Saudi Arabia would have increased the prices of its oil for Asian customers.
The tighter supply globally has pushed the Middle East crude benchmarks to multi-year highs, so it’s not unjustified for Saudi Arabia to raise its prices again, especially as demand is strong for prompt supply, according to Reuters.
The Saudis could raise the price of their flagship Arab Light crude grade by up to $1 per barrel, which would lift the price to the highest level since January 2014, according to a Reuters survey of four refinery sources.
Saudi Arabia usually sets the OSPs for its crude grades at the start of each month for deliveries for the next month and as a rule, it doesn’t comment on its monthly oil prices.
Last month, Saudi Arabia increased its prices for all crude grades for Asian buyers with delivery in June as a supply crunch resulting from U.S. sanctions on Iran and Venezuela opened an opportunity to boost revenues.
The price for Arab Light with a June delivery date is now the highest in almost a year, with Arab Medium selling at the highest price since the end of 2013, and Arab Heavy at a six-year high.
Heavy grades are in particularly great demand among Asian refiners and supply is falling because of Venezuela’s continued production decline and political woes that are aggravating the situation.