Top oil exporter Saudi Arabia may raise prices of all grades of crude it sells to Asia in July following strong refining margins for gasoline and jet fuel, while expectations of a rebound in China’s demand also supported prices, trade sources said.
The July official selling price (OSP) for flagship Arab Light crude could increase by $1-$1.50 a barrel from June, six refining sources said in a Reuters survey.
Three of the six respondents expect Arab Light’s July OSP to be raised by more than $1.50 a barrel while forecasts from the remaining people were between 85 cents and $1.40.
July OSPs are rebounding from sharp cuts seen in June but would still be off record premiums posted for May.
The Saudi price hikes are expected to come after spot premium for July-loading Middle East grades strengthened this month as gasoline cracks in Asia surged to all-time highs ahead of the peak U.S. summer driving season.
China’s oil demand is expected to rebound as the number of COVID-19 cases in the country is falling with Beijing and Shanghai gradually easing restrictions, one respondent said.
OPEC and its allies, a group known as OPEC+, meanwhile, is set to stick to an oil production deal agreed last year at its meeting on June 2 despite Western countries asking the group to ramp up output.
However, the price gains could be capped as European Commission have yet to reach an agreement on an embargo on Russian oil as part of the EU’s sixth sanctions package on Russia over its invasion of Ukraine.
China and India, the world’s No.1 and No.3 oil importers, have also been ramping up purchases of Russian oil at bargain prices.
Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude bound for Asia.
State oil producer Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.