Oil tops $120 a barrel on Saudi pricing despite OPEC+ deal

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Oil prices were largely unchanged after choppy trade on Monday, buoyed by Saudi Arabia raising its July crude prices but amid doubts a higher output target for OPEC+ oil producers would ease tight supply.

Brent crude was up four cents to $119.76 a barrel at 12:22 p.m. EDT (1622 GMT) after touching an intraday high of $121.95.

U.S. West Texas Intermediate (WTI) crude futures rose 8 cents, or 0.1%, to $118.95 a barrel after hitting a three-month high of $120.99. The benchmark fell by $1 earlier in the session.

Saudi Arabia raised the July official selling price (OSP) for its flagship Arab light crude to Asia by $2.10 from June to a $6.50 premium over Oman/Dubai quotes, just off an all-time-high recorded in May when prices hit highs due to worries of disruptions in supplies from Russia.

The price increase followed a decision last week by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to boost output for July and August by 648,000 bpd, or 50% more than previously planned, though constraint in global refining capacity has kept prices elevated.

“Crude inputs into the U.S. refineries have been reduced by about 6% from 4-years ago at this time with this reduction associating with a need for less crude cover while contributing to a severe tightness in the gasoline and diesel markets,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

The increased target was spread across all OPEC+ members, however, many of which have little room to increase output and which include Russia, which faces Western sanctions.

“With only a handful of… OPEC+ participants with spare capacity, we expect the increase in OPEC+ output to be about 160,000 bpd in July and 170,000 bpd in August,” JP Morgan analysts said in a note.

On Monday, Citibank and Barclays raised their price forecasts for 2022 and 2023, saying they expected Russian output and exports to fall by around 1 million to 1.5 MMbpd by end-2022.

Separately, Italy’s Eni and Spain’s Repsol could begin shipping small volumes of Venezuelan oil to Europe as soon as next month, five people familiar with the matter told Reuters.