Saudi Arabia has made some of the biggest price increase for crude exports in at least two decades. The decision comes after OPEC (Organization of the Petroleum Exporting Countries) and its allies, including Russia, agreed to extend record oil production cuts until the end of July.
The steepest jump will hit Asia, state-owned Saudi Aramco's largest regional market, as it raised the price for its July exports of Arab light crude to Asia by $0.20 a barrel to $6.10 when compared to June, according to a statement on Sunday. As per Blomberg calculations, its the highest month-on-month increase in price of Arab light sold to its Asian customers.
Saudi Arabia sells its crude at a differential to oil benchmarks, revising every month the discount or premium it's charging to global refiners. The official selling prices help set the tone in the physical oil market, where actual barrels change hands.
Meanwhile, global oil prices have erased almost all of the discounting seen in April. On Monday morning, Brent crude, the international benchmark for oil prices, climbed to as high as $43.41 a barrel, its highest since 6 March.
Brent has nearly doubled since the start of April, due to an unprecedented production cut of 9.7 million barrels per day by the OPEC, Russia and allies.
On Saturday, the group decided to prolong the deal to withdraw almost 10 percent of global supplies from the market till the end of July.
The tight supply and increase in oil prices will help Saudi Arabia recover from the substantial economic damage caused by the COVID-19 outbreak.
Lockdowns announced in major consumers of oil in the world, pushed the oil prices to single digits in April. Around 60 percent of the kingdom's revenues still come from oil and low prices caused a severe blow to its economy.
The value of Saudi Arabia's oil exports plunged by 21.9 percent year-on-year in the first quarter (January-March) to $40 billion, corresponding to a decline of about $11 billion. It posted a $9 billion budget deficit in the quarter as oil revenue fell by 24 percent to $34 billion, as per data from the General Authority for Statistics, Saudi Arabia government agency.
China was the main destination for Saudi exports in the first 3 months of 2020, followed by Japan and India. China was also the main origin of Saudi imports.