Brent crude climbs more than $120 a barrel after Saudi Arabia raised crude prices

A drilling rig operates in an oil and natural gas production area in the Permian Basin in Lea County, New Mexico, US, February 10, 2019. REUTERS/Nick Oxford/ File photo

SINGAPORE (Reuters) – Oil futures rose on Monday, with Brent crude rising above $120 a barrel after Saudi Arabia raised crude sales prices in July, indicating tight supply even after OPEC+ producers agreed to accelerate production increases over the next two months. .

Brent crude rose 68 cents, or 0.6%, to $120.40 a barrel at 0640 GMT, after touching an intraday high of $121.95, extending its 1.8% gain from Friday.

US West Texas Intermediate crude futures rose 61 cents, or 0.5%, to $119.48 a barrel, after earlier hitting a three-month high of $120.99. It gained 1.7% on Friday.

Saudi Arabia raised the July official selling price (OSP) for its flagship Arab Light crude to Asia by $2.10 from June to $6.50 compared to the average of Oman and Dubai indices, according to state oil producer Aramco. (2222.SE) He said on Sunday.

The July OSP is the highest since May, when prices hit all-time highs on fears of sanctions from Russia being disrupted by its invasion of Ukraine. Read more

The price increase came despite the decision last week by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, called the OPEC+ community, to increase production in July and August by 648,000 barrels per day, or 50% more than planned.

Iraq said on Friday it aimed to raise production to 4.58 million barrels per day in July. Read more

Oil producers are “keeping the straw while the sun shines,” said Avtar Sandhu, director of commodities at Phillip Futures in Singapore, adding that higher demand in the US summer and an easing of COVID-19 lockdowns in China are expected to keep prices high.

The OPEC+ decision to introduce production increases is widely seen as unlikely to meet demand as the increased allocations spread among all members, including Russia, which faces sanctions.

“While this increase is badly needed, it falls short of expectations for demand growth, particularly with the partial EU ban on Russian oil imports in mind,” Commonwealth Bank analyst Vivek Dahar said in a note.

On Monday, Citibank and Barclays raised their price forecasts for 2022 and 2023 due to the tightening of Russian supplies and the delay in the return of Iranian oil.

Analysts at Citi said the reconfiguration of flows to Asia could mean that eventually Russian production and exports will not decline much, but more in the range of 1 million to 1.5 million barrels per day. Read more

Of the 1.9 million barrels per day of European seaborne exports of crude oil, about 900,000 barrels per day could be diverted to other markets such as China/India or remain in some European markets with limited access to non-Russian oil.

Barclays expects Russian oil production to fall by 1.5 million barrels per day by the end of 2022.

Separately, Italy’s Eni and Spain’s Repsol may start shipping Venezuelan oil to Europe as soon as next month to offset Russian crude, five people familiar with the matter told Reuters, and to resume debt-oil swaps that were halted two years ago when Washington ramped up debt swaps. Sanctions on Venezuela.

However, people said it is not expected that the scale that will be acquired by the companies will be large. Read more

Additional reporting by Florence Tan in Singapore and Sonali Paul in Melbourne; Editing by Himani Sarkar, Robert Persil

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