World: Saudi Oil Prices Climb in Asia!

Saudi Arabia, a heavyweight in the oil sector, makes headlines with a new increase in oil prices for Asian buyers. This decision comes in a context of heightened volatility, exacerbated by geopolitical tensions in the Middle East and uncertainties about global energy demand.

An Adjustment Strategy in Response to Geopolitical Tensions

Saudi Arabia, a member of the BRICS alliance, has decided to increase the price of its Arab Light oil by 90 cents per barrel for its Asian customers, thereby bringing the premium to $2.20 above the regional benchmark price. This decision marks the fifth consecutive increase by oil giant Aramco for the Asian region. The Saudi company has exceeded expectations, as investors had anticipated a more moderate increase of 65 cents. Aramco made this decision in a climate of high uncertainty in the oil market, while tensions in the Middle East continue to escalate.

This choice comes as Brent, the oil benchmark, experienced an increase of over 8% this week, mainly due to Iranian missile strikes in response to Israeli attacks in Lebanon. The tense geopolitical situation has amplified concerns about oil supply stability, even though no major disruptions have been reported so far. Thus, Saudi Arabia’s decision therefore aims to offset the risks through price adjustments and to consolidate its leadership position amid Asian demand, which remains crucial for its exports.

Delicate Management of Supply within OPEC+

Alongside the price increase for Asia, Saudi Arabia and its OPEC+ partners have made an equally strategic decision: to delay a production increase initially planned for October and November 2024. This postponement is carried out with the logic of supply control, in order to avoid an oil surplus on the global market. For several months, OPEC+ and BRICS members, led by Saudi Arabia and Russia, have voluntarily limited their production. This decision allows Riyadh to maintain its exports below six million barrels per day, a historically low level for the Kingdom.

Investors interpret this choice as a preventive measure in response to signs of weakness in global demand, notably in China, where oil consumption remains below expectations. Through this supply restriction, Saudi Arabia seeks to stabilize prices to adapt to uncertainties related to global demand. This balancing act is all the more crucial as the economic health of consumer countries such as China and India will directly influence the Kingdom’s oil revenues.

By this decision, Saudi Arabia clearly shows its willingness to protect its economic interests in an unstable global context. As tensions in the Middle East continue to weigh on the market and uncertainties around global demand multiply, the Kingdom adopts a proactive posture after its new strategy related to increasing its production. However, the success of this strategy will largely depend on the evolution of geopolitical conflicts and economic recovery in Asian countries. The coming months will allow us to gauge the effectiveness of this decision and understand whether OPEC+ and BRICS will be able to stabilize a market under pressure.