(Bloomberg) --
Saudi Arabia raised pricing for August oil shipments to Asia, the U.S. and northern Europe amid signs that energy demand is recovering from its coronavirus-triggered collapse.
The world's biggest crude exporter is increasing rates as it pushes other major producers to keep cutting supply to re-balance the market.
State producer Saudi Aramco lifted the official selling price for its flagship Arab Light crude to buyers in Asia, its biggest market, for a third consecutive month, though by less than expected. Aramco raised pricing to the U.S., where it's also reining in shipments, for a fourth month.
“The increase in prices reflects the overall recovery in oil markets,” said Carole Nakhle, chief executive officer of London-based consultant Crystol Energy. “Demand growth remains uneven and may even be subject to temporary reversals, but it is unlikely to fall off a cliff because lockdowns, if re-introduced, are likely to be more localized.”
Arab Light crude to Asia rises to $1.20 a barrel above the Middle East benchmark, compared with a 20-cent premium for July, the company said in a statement. Traders and refiners, who are struggling with low margins, expected the premium to climb to $1.45, according to a Bloomberg survey.
READ: Lost in Oil's Rally: $2 Trillion-a-Year Refining Industry Crisis
Aramco raised U.S. pricing by between 20 cents and 40 cents a barrel. Light crude will sell at a premium of $1.65 a barrel, up by 30 cents, the company said. It also increased rates for most grades sold to northwestern Europe -- the main hub for which is Rotterdam. The only reductions are to the Mediterranean region, where Aramco pared prices by as much as $1 a barrel.
Saudi Arabia and Russia have led efforts by the OPEC+ producer alliance since April to reduce output and drain stockpiles. The group agreed in June to extend cuts totaling nearly 10 million barrels a day -- roughly 10% of world supply before the pandemic hit -- for a third month until the end of July. They plan to scale them back after that.
| August OSPs to Asia | Change | Premium |
|---|---|---|
| Arab Super Light | +$1/bbl | $2.65/bbl |
| Arab Extra Light | +$1 | $1.20 |
| Arab Light | +$1 | $1.20 |
| Arab Medium | +$1 | $1.20 |
| Arab Heavy | +$1 | $0.90 |
OPEC+ is “on the right track” but still has “a long way to go” before re-balancing oil markets, Saudi Energy Minister Prince Abdulaziz bin Salman said in mid-June. The Saudis slashed their crude shipments last month to a multi-year low, according to Bloomberg tanker tracking.
Brent crude has more than doubled since OPEC+'s April agreement to around $43 a barrel. The global benchmark is still down 34% this year.
©2020 Bloomberg L.P.
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