Saudi Arabia Hikes July Crude Prices after Unexpected More Production Cut

Saudi Arabia will hike the price of its trademark crude Arab Light to Asian buyers in July to a six-month high, following Sunday’s announcement that it will further cut its output beginning next month. 

In a statement, the state-owned oil giant Saudi Aramco said that it will raise the price of Arab Light crude sold in Asia by 45 cents per barrel, bringing the price to $3 above the regional standard. 

The price hike came after the world’s largest oil exporter and head of OPEC+ unexpectedly announced at a meeting on Sunday that it will cut output by an additional 1 million barrels per day beginning in July. The members of OPEC+, which includes other countries including Russia, also decided to extend the current cuts through next year.

According to a Reuters poll conducted in late May, despite the sluggish market pricing and slim refining margins, the market had projected a greater price cut of more than $1 a barrel for July Arab Light. 

Prices to the United States and Northwest Europe will all rise by 90 cents per barrel, while buyers in the Mediterranean region will face a 60 cents-per-barrel hike, said Saudi Aramco.

The voluntary cut will take Suadi’s production to its lowest level in several years after a slide in crude prices. The duration of time that this further cut will be in effect is unclear, but Energy Minister Prince Abdulaziz bin Salman has announced that the kingdom will evaluate it every month.