Oil jumps after Saudi Arabia raises crude prices

A drilling rig operates in the Permian Basin oil and natural gas producing area in Lea County, New Mexico, U.S., February 10, 2019. REUTERS/Nick Oxford/File Photo

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MELBOURNE, June 6 (Reuters) – Oil prices rose more than $2 in early trading on Monday after Saudi Arabia sharply hiked prices on its crude sales in July, an indicator of the tension in the economy. offer even after OPEC+ agreed to ramp up its production increases over the next two months.

Brent crude futures were up $1.80, or 1.5%, at $121.52 a barrel as of 2319 GMT after hitting an intraday high of $121.95, extending a gain of 1 .8% from Friday.

U.S. West Texas Intermediate (WTI) crude futures rose $1.63, or 1.4%, to $120.50 a barrel after hitting a three-month high at $120.99. The contract gained 1.7% on Friday.

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Saudi Arabia has raised the Official Selling Price (OSP) of its flagship Arab light crude to Asia to a premium of $6.50 over the average benchmarks from Oman and Dubai, from a premium of $4.40 in June, state oil product Aramco (2222.SE) said Sunday.

The move came despite a decision last week by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, to increase production in July and August by 648,000 barrels per day, 50% more than intended.

“Just days after turning the taps on a bit wider, Saudi Arabia wasted no time in raising its official selling price for Asia, its core market…seeing ripple effects on futures contracts open on the entire oil market”, manages SPI Asset Management. her partner Stephen Innes said in a note.

Saudi Arabia also raised OSP Arab Light to Northwest Europe to $4.30 above ICE Brent for July from a premium of $2.10 in June. However, it kept the premium stable for barrels destined for the United States at $5.65 above the Argus Sour Crude Index (ASCI).

OPEC+’s move to bring forward production hikes is widely seen as unlikely to meet demand, as several member countries, including Russia, are unable to increase production, while demand soars in the United States. United States amid peak driving season and China easing COVID lockdowns.

“While this increase is badly needed, it falls short of expectations for demand growth, especially given the EU’s partial ban on Russian oil imports,” said Vivek Dhar, an analyst at the Commonwealth Bank, in a note.

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Reporting by Sonali Paul in Melbourne; Editing by Sam Holmes

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