Oil prices increased after unexpected changes in Saudi Arabia's pricing policy, attracting trader interest and altering market dynamics.
Saudi Arabia's Price Hike
Saudi Arabia unexpectedly raised prices for Arab Light crude for buyers in Asia, pushing oil prices over $67 a barrel. This increase added $1 per barrel, bringing the premium to $2.20 above the benchmark starting in August. The change came straight from Aramco, Saudi Arabia’s state oil firm.
OPEC Increases Supply
OPEC+ agreed to increase supply by 548,000 barrels per day in August, a significant boost compared to earlier expectations. A further increase is being considered for September based on the cartel's meeting outcomes. This decision was made against the backdrop of strong demand in both the U.S. and China. OPEC's statement highlighted that the decision was based on a 'steady global economic outlook and current healthy market fundamentals.'
Market and Geopolitical Risks
Meanwhile, experts noted that while demand for oil remains high, its sustainability could be at risk. Robert Rennie, head of commodity and carbon research at Westpac, stated that 'OPEC+ is clearly taking advantage of a period of tightness in global energy markets.' Additionally, threats in the Middle East, including Houthi rebels' recent attack on a merchant ship, add another layer of geopolitical risk to the oil market.
The oil market remains tense, with expectations of further changes in pricing and supply. OPEC+ is leveraging high demand, but future market stability is under threat.
