Saudi Arabia’s July Price Hike Outperforms The OPEC+ Accord

On Monday, oil prices rose above $120 per barrel as Saudi Arabia boosted crude pricing for July, despite concerns that an expanded OPEC+ monthly output target will help relieve tight supplies.

At 0858 GMT, Brent crude was up 32 cents, or 0.3 percent, at $120.04 per barrel; hitting an intraday high of $121.95. After touching a three-month high of $120.99, U.S. West Texas Intermediate (WTI) crude futures were up 40 cents, or 0.3 percent, at $119.27 a barrel. Saudi Arabia increased the official selling price (OSP) for its flagship Arab light oil to Asia to a $6.50 premium in July; the most since May, when prices touched all-time highs owing to fears of Russian supply disruptions.

What Is Pushing the Prices High?

The price hike came after the OPEC+ decided last week to increase output by 648,000 barrels per day in July and August; 50% more than previously anticipated. The enhanced objective was split among all OPEC+ members. Still, like Russia, several of them have little room to expand output due to Western sanctions. “With just a few OPEC+ participants with spare capacity,” JP Morgan analysts said in a note, “we anticipate OPEC+ output to have a rise of roughly 160,000 barrels per day in July and 170,000 barrels per day in August.”

On Monday, Citibank and Barclays (LON: BARC) upped their pricing projections for 2022 and 2023; predicting a drop in Russian output and exports of 1-1.5 million BPD by the end of 2022. Separately, five individuals familiar with the situation said that Italy’s Eni and Spain’s Repsol (OTC: REPYY) might start exporting limited amounts of Venezuelan oil to Europe as soon as next month.