We have already informed you that oil producers are now experiencing a great period from their point of view and big profits. Well, however, Saudi Arabia is now raising the price of its main export commodity again, and so this ride-up for fuel prices continues.
One of the types of crude oil that Saudi Arabia sells is Arab Light, which is a high sulfur crude oil. It has gone up in price for Asian buyers by $2.10 a barrel to $6.50. The increase was expected, but only by about $1.50.
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At the same time, all grades of crude oil for north-western Europe and the Mediterranean have become more expensive. Interestingly, prices for US buyers remained unchanged for the second consecutive month.
The price increase came in response to the OPEC+ group’s decision to increase production for July and August by 648,000 barrels per day, 50% more than originally planned.
There are multiple reasons for this
Another reason is the overall tension in the commodities market, with Russia, in particular, facing sanctions from the US and Europe. At the same time, these countries, led by Europe, are still looking for the most suitable alternatives to supplies from Russia. Although it is a member of OPEC+, it is this development that gives the other countries a better negotiating position and opportunities to move the price.
There is talk in Europe, for example, that Italy’s Eni and Spain’s Repsol could import small volumes of oil from Venezuela. Pressure is also still being put on Norway, which is trying to increase its production capacity to also help Europe to overcome this situation. Of course, these steps may help, but they will still certainly not cover Europe’s total needs.
Demand is also expected to resume from China and Singapore, where the Covid-19 shutdowns are finally coming to an end after a long time. Saudi Arabia sends more than 60% of its oil exports to Asia, so this recovery in the Asian economy will be very beneficial to the oil giant.
We also recommend taking a closer look at the whole situation in terms of the analysis we did on this topic last week: OPEC as the market mover