Saudi Arabia made some of the biggest price increases for crude exports in at least two decades, doubling down on its strategy to bolster the oil market after OPEC+ producers extended historic output cuts. The steepest jump will hit July exports to Asia, state producer Saudi Aramco’s largest regional market, according to a pricing list seen by Bloomberg. Overall, the increases for Saudi crude erase almost all of the discounts the kingdom made during its brief price war with Russia.
The sharp price increases show that Saudi Arabia is using all the tools at its disposal to turn around the oil market after prices plunged into negative territory in April. As the price setter in the Middle East, the increases in its official prices may be followed by other producers.
Tighter crude supply is helping repair an oil market battered by the coronavirus. Unprecedented output cuts led by the Saudis and Russia boosted prices in May, and the OPEC+ group decided Saturday to extend those limits through July. Brent crude, down 36% this year, has clawed back some of its losses and ended trading on Friday at more than $40 a barrel.
But the profits that oil refiners make from processing crude into fuel are struggling to keep up with the rising market, and the sharp Saudi price hikes are likely to exacerbate that problem. Representatives for refineries from Europe and Asia expressed concern and said the pricing would crush margins.