NewsSaudi Aramco Hikes Oil Prices Amid Middle East Tensions

Saudi Aramco Hikes Oil Prices Amid Middle East Tensions

Saudi Aramco has raised the price of its flagship product Arab Light exported to Asia, consequently impacting oil market listings in New York. This development has sparked concerns among analysts about the situation in the Middle East, potentially leading to further price increases.

Saudi Arabia raises oil prices. The third time in a row.
Saudi Arabia raises oil prices. The third time in a row.
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9:21 AM EDT, May 6, 2024

In New York, oil prices are on the rise as investors assess Saudi Arabia's decision to increase prices for the third time on oil exported to Asia, according to brokers.

The price of West Texas Intermediate crude oil for June delivery on the NYMEX in New York is $78.49, showing an increase of 0.49 percent.

Meanwhile, Brent crude for July delivery on the ICE is priced at $83.33 per barrel, up by 0.45 percent. This is after a significant drop last week of over 7 percent, the largest since February 2024.

Third price increase

The Aramco conglomerate has increased the prices of Arab Light crude oil exported to Asian countries for the third time, indicating oil producers' confidence in the sustained high commodity prices due to OPEC+ alliance countries' limitation on oil supplies.

Saudi Aramco has raised the price of its flagship product, Arab Light, by 90 cents to $2.90/b above reference prices, exceeding Bloomberg agency analysts' prediction of a 60-cent increase.

Warren Patterson, head of commodity strategy at ING Groep NV noted that Saudi Arabia's actions are bolstering oil prices due to the increase amidst a tightening situation in the physical oil market.

Rafah problem

Meanwhile, in the Middle East, a region still attracting significant investor interest, the Israeli army has started evacuating Palestinian civilians from Rafah in the southern Gaza Strip in anticipation of a potential attack on the city.

The evacuation is currently affecting several districts on the outskirts of Rafah. The city, which had a population of about 275,000 in September of the previous year, now potentially houses up to 1.4 million people as refugees from other areas of the Gaza Strip have sought refuge there.

According to the Israeli military, Rafah remains the last major city where Hamas still has substantial forces and resources. Israeli intelligence reports suggest that commanders of this terrorist organization are present in the city, possibly along with hostages taken from Israel in October.

U.S. Secretary of State Antony Blinken has expressed concern that an Israeli attack on Rafah would lead to "unacceptable" casualties. He noted that Israel has yet to present a plan to protect civilians during the potential attack.

Middle East concerns investors

Currently, the oil markets have removed the risk premium from commodity prices as investors' fears of a broader conflict in the Middle East have subsided.

With Israel stepping back from direct conflict with Iran, volatility in the oil markets has reached its lowest level in years, according to analysts. They also point out that market focus has shifted back to "normal issues" such as oil supply from OPEC+, central bank interest rates, the global economic revival, and increasing fuel demand.

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