Arab Oil for Europe: Prices Are Rising

Next month, Saudi Arabia will raise the price of its oil exported to Western Europe. According to information released by Saudi Aramco, the national hydrocarbon company of Saudi Arabia, prices for light oil will increase in September by an average of 2-3 dollars per barrel for importers from the “remote” countries of northwestern Europe. On the other hand, for importers from “neighboring” Mediterranean countries, including Italy, price increases will fluctuate around $1-1.5 per barrel.

Aramco explained the sudden increase by referring to “strongly growing international demand.” To keep prices high, Saudi Arabia and some other OPEC+ countries agreed to new systematic cuts in oil production and exports. According to Russian Deputy Prime Minister for Energy Alexander Novak, “in September, Russia will reduce oil exports by another 300 thousand barrels per day.”

In addition, Saudi Arabia fears a weak economic recovery in China, the largest consumer of Arab hydrocarbons, and a possible economic recession in the United States. Having downgraded the US rating from “AAA” to “AA” with a “stable” outlook, Fitch said it also forecasts a “recession” for the world’s largest economy to occur between the fourth quarter of 2023 and the first three months of 2024. According to Fitch analysts, “in 2023, American GDP should grow by 1.2% compared to +2.1% recorded last year, while the forecast for 2024 indicates a modest growth of only 0.5%.”

In January-July 2023, compared to the same period of 2022, China increased imports of natural gas by 7.6% and oil by 12.4%. At the same time, the cost of gas imported by China in monetary terms increased by 1.1% to $36.9 billion, while the cost of crude oil, on the contrary, decreased by 12.3% to $187.29 billion.