Saudis hike oil prices for key Asia market in sign of confidence

Saudi Arabia raised prices for oil shipments to customers in its main market of Asia, signaling the kingdom’s confidence in the region’s economic recovery.

The decision comes after the OPEC+ cartel, led by the Saudis and Russia, agreed to boost daily crude production by more than 2 million barrels between May and July.

Aramco, the Saudi state energy firm, will increase its grades for Asia in May by between 20 and 50 cents a barrel, according to a statement. It will raise the key Arab Light grade for the region by 40 cents from April to $1.80 per barrel above the benchmark. The company had been expected to hike the grade by 30 cents, according to a Bloomberg survey of eight traders and refiners.

Most prices for North West European customers won’t be changed, though Arab Light for the region will drop by 20 cents to $2.40 below the benchmark. Most grades to the US will be cut by 10 cents.

Prices for Asia have been above those for Europe and the US for several months, partly due to energy demand in the latter two recovering more slowly from the coronavirus pandemic.

The Organization of Petroleum Exporting Countries and allies such a Russia – a grouping of 23 nations – agreed on Thursday to increase output by 350,000 barrels a day in May, add the same volume again in June and another 450,000 barrels a day in July.

In addition, Saudi Arabia – the world’s largest oil exporter – will roll back a unilateral 1-million-barrel-a day cut over the same period. It will add 250,000 barrels a day in May, 350,000 in June and 400,000 in July.

Saudi Energy Minister Prince Abdulaziz bin Salman told counterparts at the meeting that OPEC+ still needed to be cautious until the global economic recovery is complete. The group started unprecedented production curbs last May to bolster oil prices and is still holding back several million barrels a day from the market.