China cautiously returns after crushing Covid-19 lockdowns • Kingdom hiked crude prices for Asia more than predicted
Oil climbed when Saudi Arabia increased the price of its crude for Asia by more than expected, indicating that it is confident in demand. • West Texas Intermediate traded near $120 a barrel, having earlier risen to the highest level in nearly three months. Saudi Arabia boosted its official selling prices for Asian consumers in July as China, the world’s largest petroleum importer, slowly emerges from viral lockdowns that have suffocated its economy. Due to rebounding demand from countries recovering from the pandemic, as well as a tighter market following Russia’s invasion of Ukraine, oil prices have surged by nearly 60% this year. The conflict has driven inflation, raising the cost of everything from food to fuel and forcing central banks to tighten their monetary policies.
Following repeated appeals from the US to pump more, OPEC+ agreed last week to accelerate output hikes. The producer group said it would increase production by 648,000 barrels per day in July and August, a 50 percent increase over recent months. However, the company has recently struggled to meet its supply targets, raising concerns about its ability to meet the target.
“Over the summer months, sentiment should remain firmly bullish,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates. “Rising oil demand combined with insufficient supply bodes well for higher oil prices.”
The fuel market has also become significantly tighter, just as the summer driving season in the United States begins. Retail gasoline prices have reached a new high, while New York futures have also reached a new high.
At 10:12 a.m. in London, WTI for July delivery was up 0.3 percent to $119.24 a barrel.
Earlier in the session, futures rose to $120.99, the highest intraday price since March 9.
Brent crude for August delivery rose 0.2 percent to $120 per barrel.
From June to June, Saudi Aramco increased the price of its important Arab Light crude grade for Asian consumers by $2.10 per barrel, bringing it to $6.50 above the benchmark. According to a Bloomberg poll, the market was anticipating a $1.50 increase. Aramco also raised its rates in the Mediterranean and northwest Europe.
Brent continues steeply backwinded, a bullish structure in which futures with shorter maturities are more costly than those with longer maturities. In backwardation, the global benchmark’s prompt time spread was $2.76 per barrel, up from $2.69 on Friday. The differential for WTI was $2.72.