Saudi Aramco raises Asia Arab Light by $1/b for August

Saudi Aramco raised its August crude official selling price differential for its flagship Arab Light crude cargoes destined for Asia by $1/b to a premium of $2.20/b to the average of Platts Dubai and GME Oman, according to a pricing sheet sent by the company on July 6.

The increase was expected to be 50c-$1/b, traders said in survey by Platts, part of S&P Global Energy, before the announcement.

The Extra Light and Super Light differentials to Asia saw increases of $1.30/b and $1.20/b respectively. Differentials for the heavier Arab Medium and Heavy grades to Asia were up $1/b and 90c/b.

The OSPs were released a day after Saudi Arabia and its OPEC+ allies agreed to a higher-than-expected increase of 548,000 b/d in quotas for August, citing a "steady economic outlook".

This includes a 222,000 b/d quota increase for Saudi Arabia compared with July. Much of this additional supply is expected to be absorbed by increased seasonal domestic crude burn, which typically peaks in July and August, as the peak summer cooling season heats up.

The increase also follows the Israel-Iran conflict, which triggered fears over security of supply out of the Middle East and boosted oil prices in June.

Differentials for benchmark Platts Cash Dubai hit a peak premium of $3.29/b to same-month Dubai futures over June 19-20, up from a premium of $1.36/b at the start of June.

Harry Tchilinguirian, group head of research at Onyx Capital Advisory, said that Aramco was following the Dubai spreads.

"Perhaps the increase in production for August will stay home for utilities, and it will only be till September that we see the bump up in exports and then perhaps more favorable pricing," he said.

"Not something you typically do if there is a glut in the market...just saying," Tracy Shuchart, founder of Hilltower Advisors, said on X after the Aramco announcement.

Actual crude output has yet to fully reflect quota increases, with OPEC+ production increasing by 180,000 b/d to 41.19 million b/d in May, according to the Platts OPEC+ crude production survey. Quota increases totaled 411,000 b/d for May.

Algeria, Iraq, Kuwait, the UAE, Kazakhstan, Oman and Russia are also part of the group that has quota increases through the summer. All countries apart from Algeria submitted plans to compensate for overproduction since the beginning of 2024, which may be offsetting the quota increases.

OSPs for North America were unchanged to up 40c/b, while OSPs for Northwest Europe and the Mediterranean climbed $1.40/b for all grades, according to the pricing sheet.