Saudi officials have repeatedly made the case for withholding its crude market share. “Saudi Arabia has had a very difficult time selling oil in this environment,” says Ed Morse, an analyst at Citigroup. “Its rivals are going into a very crowded market in a very aggressive way.” Despite the complicated situation, the Kingdom gains a benefit from imbalance in supply and demand. Saudi Aramco, the state-controlled energy company that is implementing the oil ministry’s strategy, found a solution to change sales prices for customers from the US and Europe. Saudi Arabia raised contract prices by 20 cents for US refineries. Aramco is now invoicing crude with a 35-cent discount for customers from Northwest Europe and 10-cent discount for buyers from the Mediterranean countries. The decision came as no surprise as the Kingdom had already made deep cuts in prices to woo European buyers. As for a price hike for the US, the move is logical amid a persistent oil rally. Besides, demand usually increases in the second half of a year as crude refineries are put into operation after seasonal maintenance. Besides, oil prices are boosted by supply outages in Canada, Nigeria, and Libya.
Meanwhile, oil prices hit a fresh 11-month high, above the psychological level of $50 a barrel. The oil rally is likely to continue in the second half of 2016 for several reasons. The excess supply is set to shrink amid signs of robust demand growth from China. Crude finds support from a steady decline in US inventories and contraction in US oil production. Moreover, oil cements strong gains as the US dollar has been weakening against the basket of the majors.
