Saudi Aramco has reduced the price of its flagship Arab Light crude for Asian buyers by 20 cents per barrel, following a decision by OPEC+—led by Saudi Arabia—to increase oil production by 411,000 barrels per day in July. This marks the third consecutive month of significant output hikes. The supply boost, along with trade tensions involving the U.S., has contributed to a roughly 12% drop in oil prices in London since early April. Despite the price cut, it was smaller than the 35-cent reduction expected by market participants.
Saudi Aramco increased the price of its oil exports to the U.S. by 10 cents per barrel and raised prices to North West Europe and the Mediterranean by $1.80 per barrel for July. Despite a surprise production hike in April, Saudi Arabia continues to push for increased output to regain market share and counter overproduction by some OPEC+ members, including Russia, which had favored a smaller supply boost. While refiners have benefited from strong margins amid rising summer demand, growing crude stockpiles and a recent dip in refinery profits suggest supply is beginning to outpace demand.
According to Harry Tchilinguirian of Onyx Commodities, Saudi Arabia’s limited discount on oil prices suggests confidence in strong Asian demand as it prepares to boost output. However, he expects the actual additional supply from the planned unwinding of voluntary production cuts to be much lower than the projected 1.2 million barrels per day, due to rising domestic demand in Saudi Arabia. He also noted that OPEC+ was already exceeding its output targets before the unwinding, and only a few members, like Saudi Arabia and the UAE, have the capacity to significantly increase production.
