Saudi Arabia Expected to Raise August Oil Prices to Asia Amid Strong Demand and Geopolitical Volatility

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Asia

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Image Source: REUTERS/Hamad I Mohammed/File Photo

Saudi Arabia, the world’s largest oil exporter, is expected to raise its official selling prices (OSPs) for crude bound for Asia in August to their highest levels in four months, driven by surging spot market rates during recent geopolitical tensions and strong summer demand, according to a Reuters survey of refiners.

Industry sources estimate that the OSP for Saudi Arabia’s benchmark Arab Light crude may increase by 50 to 80 cents per barrel, reaching $1.70 to $2.00 above the Oman/Dubai average. This would mark the highest level since April, reflecting a tight market and increased buying activity across the region.

Similar price hikes are forecast for other Saudi crude grades:

• Arab Extra Light: +55 to +60 cents

• Arab Medium: +50 to +55 cents

• Arab Heavy: +50 to +60 cents

The expected adjustments follow a volatile June, triggered by a 12-day conflict between Israel and Iran, which raised fears about potential disruptions in the Strait of Hormuz a strategic chokepoint through which around 20% of the world’s oil flows. Although prices have since stabilized following a ceasefire, the conflict sent oil prices to a five-month high mid-June.

The Dubai crude benchmark also showed considerable volatility, with cash Dubai’s premium to swaps peaking at $3.34 per barrel on June 19 before settling at $2.73. June’s average premium stood at $1.88, up 61 cents from May, supporting higher OSP expectations for July and August.

Asian refiners are ramping up crude processing to meet robust summer fuel demand, while also requesting additional term crude allocations from Middle Eastern suppliers. One refining source noted that demand for Saudi term barrels remains firm, with Arab Light potentially tracking Oman crude due to tighter regional supply.

However, rising output from OPEC+ could temper price gains. The alliance is preparing for another output hike of 411,000 barrels per day in August, according to four group delegates, as it works to recapture market share amid global demand recovery.

Saudi Aramco, the kingdom’s state-run oil giant, is expected to announce its August OSPs shortly after the OPEC+ meeting on July 6. These price decisions will also influence the pricing strategies of other major regional exporters, including Iran, Kuwait, and Iraq, whose prices are typically benchmarked against Saudi grades.

Saudi Aramco determines its monthly OSPs by considering customer feedback and calculating changes in oil value over the previous month based on refining yields and product prices. The company does not publicly comment on OSP changes as a matter of policy.