Brent crude jumps above $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 jumped on Monday, with Brent crude rising above $120 a barrel after Saudi Arabia raised crude sales prices in July, a sign of a supply shortfall even after OPEC+ agreed to speed up production increases over the next two months.

Brent crude rose 91 cents, or 0.8%, to $120.63 a barrel at 0343 GMT, after touching an intraday high of $121.95, extending its gain of 1.8 percent from Friday.

US West Texas Intermediate crude futures rose 93 cents, or 0.8%, to $119.80 a barrel, after earlier hitting a three-month high of $120.99. It gained 1.7% on Friday.

Saudi Arabia raised the official selling price (OSP) of its flagship Arab Light crude to Asia to a premium of $6.50 against the average of Oman and Dubai indices, from a premium of $4.40 in June, according to oil producer Aramco. (2222.SE) He said on Sunday.

The OSP for July is the highest since May, when prices hit an all-time high on fears of supply disruptions from Russia amid sanctions over its invasion of Ukraine. Read more

The price hike came despite a 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 previously planned.

Iraq said on Friday it plans 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 increased demand in the US summer and an easing of COVID-19 lockdowns in China are expected to keep prices high.

OPEC+’s move 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.

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; Edited by Himani Sarkar

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