Oil Gains on Saudi Price Hike
by Bloomberg | Mia Gindis, Jack Wittels
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil rose as Saudi Arabia surprised customers in Asia by hiking prices for its main crude grade, a vote of confidence that the market can absorb extra OPEC barrels.
West Texas Intermediate crude advanced more than 1% to settle just below $68 a barrel, erasing earlier losses, while Brent settled above $69 a barrel. Saudi state producer Aramco will raise the price for Arab Light crude, its flagship grade, by $1 a barrel to $2.20 a barrel more than the regional benchmark for Asian customers in August, according to a sheet from the company seen by Bloomberg.
The pricing move staved off a rout in oil after a simultaneous decision by eight OPEC+ nations to increase supply more rapidly than expected, adding 548,000 barrels a day in August, with more expected in September.
“The decision to raise prices during the peak summer demand season signals that physical markets remain tight, suggesting the additional barrels can be absorbed — for now,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “In the short term, downside risks to crude appear contained.”
Meanwhile, President Donald Trump unveiled the first in a wave of promised letters that threaten to impose higher tariffs rates on key trading partners, including levies of 25% on goods from Japan and South Korea beginning Aug. 1. That start date pushed back the previous July 9 deadline for country-by-country tariffs to go into effect.
The move allows trade partners more time to negotiate away economy-crushing levies on their exports to the US. The delay has improved the near-term demand outlook for oil-consuming nations, including the European Union, which is facing especially punishing tax rates. Still, uncertainty surrounding the final outcome of talks continues to weigh on crude prices.
Traders and analysts also noted that OPEC’s decision to hike production at a faster-than-anticipated rate highlights bullish market fundamentals, including resilient demand in the US and China, as well as pockets of extreme tightness in the physical market amid summer driving season. The larger increase also amplifies a dramatic strategy pivot away from years of output restraint to reopening the taps to reclaim market share.
The Organization of the Petroleum Exporting Countries and its allies had announced hikes of 411,000 barrels a day for May, June and July — already three times faster than initially planned — and traders had expected the same for August. The cartel will consider adding another 548,000 barrels a day in September at its next meeting on Aug. 3, according to delegates.
The boost was based on “a steady global economic outlook and current healthy market fundamentals,” the group said in a statement on Saturday.
Traders snapped up oil futures ahead of the close as Yemen’s Houthis claimed responsibility for an attack on a ship sailing through the Red Sea in their first strike on merchant shipping since December, reviving the market’s geopolitical risk premium.
Oil has been trading in a relatively narrow band since the pause in the Israel-Iran conflict, which saw Brent top $80 a barrel.
OPEC+ is “clearly taking advantage of a period of tightness in global energy markets,” said Robert Rennie, the head of commodity and carbon research at Westpac Banking Corp. However, there are “downside risks” to oil prices as seasonal demand wanes after summer, he added.
Oil Prices
- WTI for August delivery settled 1.4% higher at $67.93 a barrel.
- There was no settlement on Friday due to the US holiday.
- Brent for September delivery was 1.9% higher at $69.58 a barrel.
by Bloomberg | Mia Gindis, Jack Wittels
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas