West Texas Intermediate switched between gains and losses after earlier topping $120 a barrel to trade near a three-month high. Saudi Arabia boosted its official selling prices for Asian customers in July as China — the world’s top crude oil importer — cautiously emerges from virus lockdowns that have strained its economy.
Oil has rallied almost 60% this year as rebounding demand from economies recovering from the pandemic coincided with a tightening market after Russia’s invasion of Ukraine. Indian refiners are working on finalizing new six-month supply contracts for Russian crude, which if secured would be on top of the country’s existing purchases from Russia.
OPEC+ last week agreed to accelerate output increases following repeated calls by the US to pump extra volumes. The producer group said it would add 648,000 barrels of oil a day for July and August, about 50% more than the increases seen in recent months. However, the group has struggled recently to meet its supply targets, raising doubts about whether it would be able to meet the goal.
“Sentiment should remain decidedly bullish over the summer months,” said Stephen Brennock an analyst at brokerage PVM Oil Associates. “The rebound in oil demand coupled with the backdrop of inadequate supply has the makings for higher oil prices.”
The fuel market has also tightened considerably, just as the peak period for US demand kicks off with the summer driving season. Retail gasoline prices have rallied to a record, while ol futures in New York hit a fresh high on Monday.
Saudi Aramco raised its key Arab Light crude grade for Asian customers by $2.10 a barrel from June to $6.50 above the benchmark it uses. The market was expecting a boost of $1.50, according to a Bloomberg survey. The company also increased its oil prices for northwest Europe and the Mediterranean regions. Brent remains steeply backwardated, a bullish structure where near-dated contracts are more expensive than later-dated ones. The prompt time spread for the global oil benchmark was $2.76 a barrel in backwardation, compared with $2.69 on Friday. For WTI, the spread was $2.72.