Saudi Arabia may hike oil prices to record even as traders see risks

 OPEC+ kingpin Saudi Arabia is expected to hike the price of its flagship crude oil at a record differential to Asia for September even as traders see the scope for a weaker spot market the following month.

According to Bloomberg, the world’s top crude exporter is expected to price its Arab Light crude to Asia at a $10.80-a-barrel premium to the region’s benchmark for September-loading cargoes, highlighting a potential turning point for the market. Arab Light is a medium-gravity and high-sulfur crude oil produced by the Kingdom of Saudi Arabia (KSA).

The traders reportedly said that a slump in margins for Asian processors means that a hike may affect any requests for extra barrels of crude oil. 

Saudi Arabia is the de facto leader of the Organisation of Petroleum Exporting Countries (OPEC), which seeks to navigate the global oil market by regulating production with allies, including Russia. OPEC+ said its next meeting would take place on August 3 to assess the supply policy of crude oil. 

Saudi Aramco, the Saudi Arabian Oil Company, is set to release its official selling prices for September next week.

In July, Saudi Arabia raised oil prices for Asian buyers to higher-than-expected levels amid the Russia-Ukraine war. The hike by Saudi Aramco came despite an agreement by OPEC+ states to boost output by 648,000 barrels per day in July. The company also raised its OSP (official selling price) for European and Mediterranean buyers. 

Reportedly, OPEC+ states agreed to increase production of crude oil by 648,000 barrels per day for August. Saudi Arabia’s oil and gas sector accounts for about 50 percent of Gross Domestic Product (GDP). 

Crude oil prices have risen significantly this year due to war. Bloomberg said prices have risen more than 50 percent so far in 2022.