Saudi Arabia caps petrol prices in July to support local economy

The kingdom will continue to monitor the fuel market to ensure that prices remain beneath the current ceiling

Saudi Arabia, the world's largest exporter of oil is also the region's biggest consumer of gasoline. Reuters

Saudi Arabia placed a ceiling on petrol prices for July to boost economic activity in the country and reduce the cost of living.

The kingdom issued a royal decree capping the prices of a litre of petrol at 2.18 Saudi riyals ($0.58) and 2.33 riyals for the Octane 91 and Octane 95 grades.

"The state shall shoulder any increase over June pricing, during the monthly periodical revision of the pricing," the Saudi Press Agency reported, quoting a statement from the executive committee for the governance of amending energy and water product prices.

The decree took into consideration "the burdens of the livelihood of citizens, as well as residents", the committee said.

Oil prices have increased by about 50 per cent since the beginning of the year as a gradual reopening of the world economy and relaxation of movement restrictions sparked a rise in demand for crude.

Prices hit multi-year highs this month with West Texas Intermediate, the main US benchmark, rising above $75 a barrel for the first time since 2014.

Brent, the international benchmark under which two thirds of the world's oil is traded, is up 45.8 per cent this year. It settled 1.93 per cent higher at $75.55 a barrel on Friday while WTI closed 2.22 per cent higher at $74.56 a barrel.

The benchmarks have gained about 6 per cent over the past four weeks, narrowing their spreads amid a tightened market outlook.

The kingdom's latest measure comes after petrol prices increased in July. The Octane 91 and Octane 95 fuel grades rose to 2.28 riyals and 2.44 riyals, respectively, prompting government action.

The authorities will continue to monitor the fuel market to ensure that prices do not exceed the official ceiling, the decree said.

Saudi Arabia, the world's largest exporter of oil, is also the region's biggest consumer of gasoline.

The kingdom began phasing out subsidies in 2015 by raising the price of higher-grade petrol by 50 per cent.

Saudi Arabia is looking to stimulate demand in the economy, which is expected to grow 2.4 per cent this year and by 4.8 per cent in 2022, according to the International Monetary Fund.