Crude Oil Depreciates as Saudi Arabia Raises Export Prices

June 7,2022

Crude oil prices dropped after touching $121 per barrel on Monday, June 6 as Saudi Arabia said it would raise its prices of the commodity for most regions, excluding the United States.

Saudi Arabia raised the July official selling price (OSP) for its flagship Arab Light crude to Asia by $2.10 from June to a $6.50 premium, the highest since May, when prices hit all-time highs due to worries of disruption in supplies from Russia

The increase in prices was the biggest for Asian buyers as well as for the European market.

The country also hiked the price for the grade that is similar to Russia’s Urals by $2.20 for European buyers, to $4.30 per barrel over Brent crude.

This action followed a decision last week by the Organisation of the Petroleum Exporting Countries and allies, together called OPEC+, to boost output for July and August by 648,000 barrels per day, or 50 per cent more than previously planned.

The increased target was spread across all OPEC+ members, however, many of them including Nigeria don’t have the capacity to increase output.

The market reacted to this development yesterday, causing the price of the Brent crude to drop 0.3 per cent or 35 cents to trade at $121.95 per barrel as the West Texas Intermediate (WTI) crude declined by 0.5 per cent or 55 cents to $118.30 per barrel.

Analysts believe that despite Saudi Arabia being one of the few OPEC members that have spare capacity, it may be wary of tapping it in any sizeable way right now.

Prices may continue to rise as Chinese demand comes roaring back after easing of lockdown as well as a boost in demand from south-eastern Asian countries in terms of road-transportation demand.

This is expected as Russia is to witness a huge fall in its output as its continental neighbours shut the door on its dependence.

EU leaders last Monday agreed to ban 90 per cent of Russian crude by the end of the year as part of the bloc’s sixth sanctions package on Russia since the late February invasion

On Monday, Citibank and Barclays raised their price forecasts for 2022 and 2023, saying they expect Russian output and exports to fall by around 1-1.5 million barrels per day by end of 2022.