Crude oil futures edged higher in mid-morning trade in Asia June 6 after surging by more than $2/b at the open, as Saudi Arabia aggressively hiked its official selling prices for Asia in a sign that it expects demand to remain robust despite soaring oil prices, reports SP Global.
Surge on Saudi OSP
Saudi Aramco raised all of its OSPs across Asia, Europe and the Mediterranean for July-loading cargoes and kept US differentials unchanged, with Asia-bound barrels seeing the largest increases of between $1.80/b and $2.75/b, according to a pricing document released June 5.
Aramco had been expected to raise its Asia-bound July OSPs by around $1.50/b after lowering them for June, mirroring the rise in the benchmark Platts Dubai sour crude complex in May, sources told S&P Global Commodity Insights.
The OSP hike propelled the August ICE Brent crude contract to an intraday high of $121.95/b, while the front month NYMEX crude contract was now at highs not seen since early-March when it briefly topped $130/b.
“Mere days after opening the spigots a bit wider, Saudi Arabia wasted little time hiking its official selling price for Asia, its primary market,” SPI Asset Management’s managing partner Stephen Innes said in a June 6 note.
“Saudi Light OSP jumped, seeing knock-on effects at the Futures Open across the oil market spectrum.”
Tight oil market
Aramco’s move will do little to curb fears of a tight oil market that has seen refined product inventories in the West fall to multi-year lows. Analysts noted that the OPEC+ producer group’s pledge last week to raise their monthly production quotas, as well as US President Joe Biden’s plan in April to release 1 million b/d of oil from its reserves, has failed to slow the rise in oil prices.
“Refined product markets continue to reflect significant tightness, with plenty of strength in refinery margins over the last week,” ING analysts Warren Patterson and Wenyu Yao said.
“There is no quick fix to this tightness in the products market. We will have to see either demand destruction or increased run rates from refiners,” they added.
Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia June 6 from the previous close.
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Source: SP Global
