Saudi Arabia raises oil price for Asia, citing demand outstriping supply



 

Saudi Aramco price hike of Asia

Saudi Aramco, the state owned oil giant, reversed its decision to lower the price of crude oil for Asia and increased the price instead for July by 20cents.

Last month, Saudi Arabia reduced the price of crude oil for the same region where 60% of its core customers are in as a gesture of goodwill: the region in question is still battling with a catastrophic surge in Covid-19 infections, with India, the third largest consumer of the commodity in the world, being the worst hit; the pandemic situation in Japan, Malaysia and a few in the region is far from over.

In a surprise move, Aramco has not raised the price of crude oil for the US, the world’s largest producer of the fuel.

Saudi Arabia’s decision is attributed the surging demand of crude oil, especially in the US and Europe; the OPEC+ believes that the demand will outstrip the supply and hence producers want to cash in on it.

There may be another factor, though. Iran and the West are going into the sixth phase of discussion on the 2015 nuclear deal, known as the JCPOA. Since both sides of the talks are determined to make it the final round, the possibility of a deal being struck is reasonably high, as both sides are fully aware of the stakes in the event of a failure.

On the other hand, by reading between the lines of the respective communique, it is clear the gap between disagreements is narrowing. Iranian delegation is back in Tehran for consultations and the rest in their respective capitals for the same.

As far as the delegations of the West are concerned, they have to allay fears of Iran’s foes in the region, which want strict monitoring Iranian nuclear activities – with a deal or not; that means, these delegates have the enviable task of walking the tight rope before them in difficult scenarios.

Although some oil producers are anxious about Iran’s return to the oil markets and its impact on the oil price, Iran will not take self-harming measures to hurt its own trade; OPEC+ still believes Iranian oil will return to the markets in an orderly and transparent matter, measurement of both indicators will not be easy.

Anticipating a hypothetical threat to the oil price in general and Saudi revenue in particular, Saudi Arabia may have decided to make hay while the sun shines – even if it means a serious blow to its solid customer base in Asia.

 


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