Saudi Arabia Makes Largest Oil Price Increase In 20 Years

Saudi Arabia made some of the biggest price increases for crude oil exports in 20 years, doubling down on its strategy to bolster the oil market after OPEC+ producers extended output cuts.

The increases for Saudi crude oil erase almost all of the discounts that the Kingdom made during its recent 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.

Saudi Arabia sells its crude oil at a differential to oil benchmarks, announcing every month the discount or premium it’s charging to global refiners. The so-called official selling prices help set the tone in the physical oil market, where actual barrels change hands.

With China’s demand for crude oil rising, the Saudis are raising prices. The month-on-month increase in the official selling price for flagship Arab Light crude to Asia, which accounts for more than half of Saudi oil sales, is the largest in at least 20 years. Saudi Aramco raised Arab Light to Asia by $6.10 U.S. a barrel to a premium of 20 cents U.S. over the benchmark.

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 last Friday at more than $40 U.S. a barrel.