With Asia being the main market, Saudi Arabia has increased oil price by more than expected after crude surged above $70 a barrel. The OPEC forecast also suggests that global demand would heavily outstrip supply for the rest of 2021.
State energy firm, as per Bloomberg, Saudi Aramco hiked its key Arab Light grade for July shipments to Asia by 20 cents to $1.90 a barrel above a benchmark. As such, prices for four of Aramco’s five Asian grades were increased, with the only drop coming for heavy crudes However, the Organization of Petroleum Exporting Countries (OPEC) this week, predicted, that oil stockpiles will decline rapidly from August as lockdowns ease across major economies and travel picks up.
The report said that OPEC and its partners stuck to a plan to boost production this month and in July, but refused to say what their plans were. Prince Abdulaziz bin Salman, Saudi Energy Minister, at a forum in St. Petersburg, Russia on Thursday, said there will always be good amount of supply to meet demand. “We’ll have to see demand before producers increase supply.”
The Kingdom of Saudi Arabia sends more than 60% of its exports to Asia – with China, India, South Korea and Japan being the biggest buyers. According to preliminary data compiled by Bloomberg, it shipped 6.1 million barrels a day. In May 2020, OPEC made unprecedented output cuts due to the COVID-19 pandemic as it shut down businesses and crushed the global economy. Moreover, most Persian Gulf countries set official selling prices each month as a premium or discount to a benchmark.
Howie Lee, an economist at Oversea-Chinese Banking Corp, told Bloomberg that there is some confidence right now improving demand should be able to absorb what could be an additional two million barrels a day from Iran. He pointed out that demand from the US has been driving the global consumption recovery. Rising prices could become a problem, however, analysts from within OPEC expect global oil inventories to decline fast, possibly prompting the cartel to boost production faster than originally planned.