By David Ho
Investing.com – Oil was up on Monday morning in Asia after Saudi Arabia raised the price steeply for its crude sales in July, a sign that supplies remain tight even though OPEC+ agreed to accelerate its output increases over the next two months.
Brent oil futures rose 0.62% to $120.46 by 10:06 PM ET (2:06 AM GMT) and crude oil WTI futures jumped 0.67% to $119.42.
Saudi Arabia hiked the official selling price (OSP) for its flagship Arab Light crude to Asia to a $6.50 premium versus the average of the Oman and Dubai benchmarks, up from a premium of $4.40 in June, announced state oil produce Aramco (TADAWUL:2222) on Sunday.
The decision arrived despite a call last week by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to increase output in July and August by 648,000 barrels per day, or 50% more than previously planned.
"Mere days after opening the spigots a bit wider, Saudi Arabia wasted little time hiking its official selling price for Asia, its primary market...seeing knock-on effects at the futures open across the oil market spectrum," said Stephen Innes, SPI Asset Management managing partner, in a note.
Saudi Arabia also increased the Arab Light OSP to northwest Europe to $4.30 above ICE (NYSE:ICE) Brent for July, up from a premium of $2.10 in June. But it held the premium steady for barrels going to the United States at $5.65 above the Argus Sour Crude Index (ASCI).
The OPEC+ decision for output hikes is widely thought of as unlikely to meet demand as several member countries, including Russia, are unable to boost output. Meanwhile, demand is soaring in the United States amid peak driving season and China is easing COVID lockdowns.
"While that increase is sorely needed, it falls short of demand growth expectations, especially with the EU's partial ban on Russian oil imports also factored in," Commonwealth Bank analyst Vivek Dhar said in a note.