Saudi Arabian Oil Co. (Aramco) adjusted its official selling price for July loadings of Arab Light to Asia, reducing it to $1.20 a barrel above the Oman/Dubai average, down from $1.40 in June. This change reflects a weaker demand forecast in Asia, impacting light and medium crude grades, while pricing for Arab Heavy remained constant.

Conversely, Aramco increased prices for shipments to Northwest Europe and the Mediterranean by $1.80 per barrel. In the United States, Arab Extra Light and Light prices rose modestly by $0.10, with no alterations for Medium and Heavy grades.

Opec Production Increase

These pricing adjustments coincide with OPEC+ members’ agreement to increase production for the third consecutive month in July. This decision raises concerns about a potential supply surplus in an unpredictable demand landscape.

The recent pricing shift from the Saudi producer, particularly the $0.20 reduction for Arab Light to Asia, is a direct response to the current demand softness observed across several Northeast Asian refineries. A drop like this does not emerge from guesswork—it often comes on the back of early buying signals and forward contract interest, which are keenly followed by state firms. What we’re seeing is less competition for barrels in that part of the world, especially for lighter grades, which are more sensitive to crack spreads and transportation margins.

Meanwhile, pricing into Europe has moved the other way—up by $1.80. That kind of upward movement implies one of two things: either regional refiners are scrambling for secure supply ahead of planned maintenance, or shipping constraints are increasing the cost of delivering comparable grades from elsewhere. When European differentials tick up this sharply in tandem, it often follows tighter medium sour balances in the Mediterranean storage hubs and firming margins on kerosene-rich blends.

In the United States, the marginal increase of just $0.10 for lighter streams like Arab Extra Light leaves little doubt that the producer is managing expectations. Inventory levels there remain generally balanced, with Gulf Coast imports sitting within seasonal norms. Still, we must read this as a hedge—a way of staying competitive while not fanning expectations of a tighter supply than actually exists.

Broader Supply Concern

Now, onto the broader supply concern. With the group’s production quota being raised again in July—three months running—that’s not a subtle move. It gives us a very clear message: producers are confident in their operational capacity but perhaps less so in near-term demand. If buying doesn’t catch up, shells of oversupply will mount in floating storage or show up in widening Brent-Dubai spreads.

This means we must track differentials closely against dated benchmarks, particularly in Asia. Falling premiums against Oman/Dubai prompt us to re-examine time spreads and the willingness of refiners to take on new barrels before peak summer demand. Weak spot structure, when paired with rising output, lowers the value of prompt cargoes in the derivatives chain—flattening forward curves or even dragging them into contango if sentiment dips.

This is not a time to trade in broad strokes. Price strength in Europe and the Med reflects localised demand and logistics, not a wider recovery. We should treat those as short bursts, not broad trends. Likewise, stability in Arab Heavy tells us that complex refiners with coke or residue units are still running flat out while margins support it—but demand for lighter fractions is sputtering.

Focus will shift to refining margins and run rates, especially when we start seeing updated data out of Singapore and Korea. Any prolonged drop in utilisation there will reverberate through term contracts and prompt term adjustments, especially for September loadings negotiated later this month.

We should remain attentive to relative value between grades, not just outright differentials. In a market where one set of prices rises while another set falls, arbitrage opportunities become clearer. That split in direction across regions strengthens the need to monitor freight spreads, bunker costs for VLCCs, and the re-routing of cargoes between the Atlantic Basin and East Asia.

This is the kind of setup that often prompts volatility in crude time spreads, especially in the second and third month contracts. For us, it’s a moment to approach with care—run the numbers, widen scenarios, and hold positions lightly until spreads confirm the trend.

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