Saudi Arabia, the world’s leading oil exporter, is poised to raise crude prices for Asian buyers in March, pushing them to the highest levels in over a year. This increase is driven by a surge in global demand, particularly from China and India, as well as ongoing disruptions to Russian oil supply due to U.S. sanctions. The official selling price (OSP) for Saudi Arabia’s flagship Arab Light crude could rise by $2 to $2.50 per barrel from February levels, with some traders predicting a more substantial increase of up to $3 per barrel across all grades.

The anticipated price hike would mark the highest premium for Arab Light crude since January 2024, climbing to at least $3.50 per barrel above the average of the benchmark Oman and Dubai prices. In comparison, February’s premium was just $1.50 per barrel. If the expected $2 per barrel increase materializes, it would represent the largest monthly rise since August 2022, underscoring the tightening oil market dynamics.

Saudi Arabia’s price adjustments will also impact its other crude grades, such as Arab Extra Light, Arab Medium, and Arab Heavy, which are projected to increase by a minimum of $1.80 per barrel. These changes reflect broader trends in the oil market, with the backwardation in the Dubai market—where current prices are higher than those for future months—widening by $2.05 per barrel in January. Backwardation typically signals tight supply or heightened demand.

The price hike comes amid significant disruptions in Russian oil exports, which have been exacerbated by the U.S. government’s sanctions targeting Russian oil producers, tankers, and insurers. These sanctions have led refiners in China and India to seek alternative supplies, driving up premiums for benchmark crudes such as Oman and Dubai to their highest levels since November 2022.

OPEC- a coalition of oil-producing countries responsible for around half of the world’s crude output—has played a role in the tightening market by agreeing to delay the planned increase in oil production until April and extend the full unwinding of production cuts until the end of 2026. These factors have combined to create an environment of tight supply, which Saudi Arabia is capitalizing on by adjusting its OSPs.

Saudi Aramco, the state-owned oil giant, is expected to release the official March OSPs around February 5. These prices will likely set the tone for other Middle Eastern oil producers, such as Iran, Kuwait, and Iraq, whose prices follow Saudi Arabia’s lead. The shift in pricing trends could have a significant impact on the global oil market, particularly in the Asian market, which consumes around 9 million barrels per day of Middle Eastern crude.

Despite the expected price increases, some refiners have expressed concerns about weak demand and low margins in the Asian market, which could dampen the impact of higher prices. Nonetheless, Saudi Arabia’s price adjustments are poised to reshape the market in the coming months.