(Bloomberg), Oil’s gains have extended to their highest point in nearly three months following a Saudi Arabian signal of confidence in its demand outlook, by increasing the crude price for Asia by more that expected.

West Texas Intermediate futures surged around 2% to close to $121/barrel in the early trade, before gaining some ground. Saudi Arabia raised its official selling prices for Asian customers in July as China — the world’s top crude importer — cautiously emerges from virus lockdowns that’s strained its economy.

Oil has rallied more than 60% this year as rebounding demand from economies recovering from the pandemic coincided with a tightening market after Russia’s invasion of Ukraine. This war has increased inflation and driven up food prices. It also prompted central bank aggressive tightening of monetary policy.

OPEC+ agreed last week to increase output after repeated US calls to do so. It claimed it would pump 648,000 more barrels daily for July and august, which is approximately 50% higher than recent increases. The group’s recent failure to reach its supply targets has raised doubts as to whether the cartel will be able meet this goal.

Saudi Aramco (TAWUL) TADAWUL raised its Arab Light crude oil grade for Asian customers from June by $2.10 per barrel to $6.50 higher than the benchmark. According to Bloomberg surveys, the market expected a $1.50 increase. Aramco has also raised its prices in the Mediterranean region and for northwestern Europe.

It remains strongly backwardated. This is a bullish structure in which near-dated contracts tend to be more expensive than the later ones. On Friday, the prompt timespread of the global benchmark was $2.79 per barrel in backwardation compared to $2.69 on Friday. WTI had a spread of close to $3.

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