Oil Advances After Weekly Slump as Saudi Arabia Jacks Up Prices

(Bloomberg) -- Oil advanced after a weekly drop as Saudi Arabia hiked selling prices for grades to Asia for the third month in a row, signaling confidence in the outlook with the OPEC+ cartel cutting supply.

Brent climbed above $83 a barrel after slumping more than 7% last week to post the biggest loss since February. West Texas Intermediate was around $78. Saudi Aramco raised the June official selling price of its flagship Arab Light grade by 90 cents to $2.90 a barrel above benchmark prices. That compares with an increase of 60 cents forecast in a Bloomberg survey.

Oil sank last week as risks of conflict in the Middle East eased, paring the commodity’s year-to-date gain. OPEC and its allies are widely expected to press on with supply cuts in the second half when they meet next month. Ahead of that, laggards Iraq and Kazakhstan have outlined plans on how they will curb flows to bring output in line with already-agreed-upon quotas.

The “price action has been more supportive in early morning trading today on the back of a hike in Saudi OSPs” amid a tightening physical market, said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. That’s despite futures having come under pressure as Middle East tensions continued to ease, he added.

Talks over the weekend on a potential truce between Israel and Hamas broke up inconclusively. Options markets, meanwhile, have shed the risk premium as fears of a wider war dissipate. Brent skews are at their most bearish in nearly two months, with the discount of calls to puts at the widest since March.

Brent’s prompt spread — the difference between its two nearest contracts — has eased in recent weeks, but remains in a positive, backwardated structure with near-term barrels more costly than those further out. The gap was 53 cents a barrel, down from 93 cents two weeks ago.

©2024 Bloomberg L.P.