Saudi Aramco has raised its official selling prices for light crude oil to Asian customers for the first time in three months. The price of its flagship Arab Light crude has increased by $0.20 per barrel for September delivery. However, the prices for Arab Medium and Arab Heavy crude remain unchanged for Asian buyers.
Following this increase, Arab Light will be priced at $2 per barrel above the Oman/Dubai average for Asian buyers next month. Despite this hike, the rise was less than the 50% anticipated by analysts. The September price for Arab Light will be the highest in two months.
This price adjustment is notable given recent economic reports from China, which suggest weakening growth in oil demand. Such conditions typically do not favor price increases. However, Aramco’s decision to raise prices could indicate that the negative reports from China might not fully reflect the demand situation or that there is stronger demand in other parts of Asia.
In contrast, Aramco has lowered crude prices for other regions, including Europe and the United States, signaling weaker demand in these areas. Prices for Europe have been reduced by 2.75%, while U.S. prices have been cut by 0.75%.
China’s oil demand has been a major factor influencing oil prices recently, with disappointing economic indicators and slower oil import growth contributing to a generally pessimistic market outlook. Aramco’s decision to increase prices for Asian customers, despite recent declines in Chinese diesel consumption and slower overall fuel demand, may shift market sentiment. The decline in diesel consumption is partly due to a rise in LNG-powered trucks.
China’s slower fuel demand is also linked to a weakened manufacturing sector and a less viable export-driven growth model, according to Zameer Yusof, principal middle distillates analyst at Kpler. Aramco’s price increase thus stands out as a strong indication that the company believes Chinese demand remains robust, despite contrary data.