Saudis Seek to Bolster Oil Rally With Price Boost as OPEC+ Cuts

Saudi Arabia made some of the biggest increases in pricing for its crude exports in at least two decades, doubling down on its strategy to bolster the rally in oil a day 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 one-month price war with Russia.

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 for the first time since March.

U.S. President Donald Trump hailed the OPEC+ producers’ restraint for helping to save the American energy industry, particularly shale oil drillers hard-pressed by the earlier collapse in prices.

Saudi Arabia unleashed a price war in March when it slashed official selling prices by the most in three decades. The kingdom took that drastic step after failing to reach an agreement with Russia to extend production cuts in the face of the pandemic’s destruction of oil demand.

After Tweets, phone calls and top-level consultations, OPEC+ returned to negotiations and hammered out the biggest output curbs in history, pledging to take nearly 10 million barrels a day off the market. U.S. production plunged by roughly 2 million barrels daily as low prices drove producers to shut wells.

China Demand

OPEC+ chose on Saturday to renew production limits at almost the same level, instead of tapering them as planned at the end of June. Aramco, which typically announces pricing on the fifth day of each month, had delayed its July numbers until after OPEC+ members made their decision.

With China’s demand for crude now 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. Aramco raised Arab Light to Asia by $6.10 a barrel to a premium of 20 cents over the benchmark.

It raised July pricing for all grades to Asia by between $5.60 and $7.30 a barrel. That compares with an expected increase of about $4 a barrel, according to a Bloomberg survey of eight traders and refiners.

Buyers in the U.S., the Mediterranean region and Northwest Europe will also pay more for oil.

— With assistance by Serene Cheong

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