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Saudi price hike

targets Asian

customers

POLICY SAUDI Arabia has increased oil prices on all
shipments of crude from July 1 to its biggest
export market.
The move has been brought about by Asian
markets bouncing back, after recent lockdowns
relating to the coronavirus (COVID-19) pan-
demic, to near-normal levels in many areas.
Japan in particular is clawing its way back to
normal by opening up to limited tourism. Not
far behind is the world’s second-largest economy,
China, now on the rebound after locking down
much of its population for much of the past three
months.
The price increases themselves were not
wholly unexpected.
As such, the July price for Saudi crude will
now continue on an upward trend initiated in
February, albeit with a brief pause in June to give
a brief respite to Asian countries hit by COVID-
19 outbreaks.
China, Japan, India and South Korea pur-
chase the bulk of Saudi exports to Asia. The
region routinely orders around 60% of all Saudi rise in Saudi crude prices from being passed on
crude produced. to their residents.
The jump in prices was, however, significantly This is becoming harder and harder, though,
higher than expected across the region. Most as crude prices have now gone up by over 50%
notably, July shipments of Saudi Aramco Arab since the start of the year, and are approaching
Light crude heading to Asia will see an increase $120 per barrel.
of $2.10 per barrel compared to a month earlier. This has seen China and India in particular
This will take total prices per barrel to $6.50 lean on Russian crude exports despite pressure
above the benchmark, and $0.60 higher than from the UK, US and European Union member
China, Japan, most widely anticipated prices as surveyed by countries to shun Russian output.
But as the flow of Russian crude contin-
Bloomberg when speaking to regional traders.
India and South A similar Reuters survey of six unnamed ues to be tightened by sanctions, just how long
Korea purchase refining sources saw half of those asked project Beijing and New Delhi can continue to import
an increase of $0.85-1.40 with the other three discounted shipments of Russian Urals crude is
the bulk of Saudi predicting a rise of over $1.50. increasingly open to speculation.
Price increases for crude sales to Northern
Just over a week ago OPEC+ gave the thumbs
exports to Asia. European as well as Mediterranean countries up to production increases. According to reports
saw similar hikes, although no price rise was from Riyadh, the Saudi-led 23-member group
seen on US-bound shipments. announced that it was upping its output by
Vitol Group’s head of Asia, Mike Muller, 648,000 barrels per day (bpd).
speaking to a Gulf Intelligence podcast last week, This increase is expected to run from July 1 to
called the demand rebound in Asia “quite some- the end of August and is a full 50% higher than
thing” adding that “a lot of the south-eastern numbers released in the preceding few months,
Asian countries, where I’m based, are very much if realised.
exceeding expectations in terms of road-trans- Growing numbers of regional analysts are
portation demand. And try buying an air ticket pointing to a lack of capacity to meet these fig-
in Singapore in the summer holidays. It’s awfully ures by member countries other than Saudi Ara-
tough.” bia and the United Arab Emirates.
And things are not expected to improve, at In short, this leaves the 21 other members of
least not in the short term. As a result, some OPEC+ already operating at close to capacity,
Asian countries are working hard to prevent with limited ability or infrastructure to produce
wider price increases commensurate with the more oil.™

Week 23 10•June•2022 www. NEWSBASE .com P7