Saudi Aramco Cuts Asian Crude Prices to Six-Year Low Amid Rebounding Oil Flows

Saudi Aramco has lowered prices for its flagship crude grade sold to Asian buyers to a six-year low, positioning the world's largest oil exporter to compete aggressively for market share as shipments through the Strait of Hormuz begin to recover.

According to a Bloomberg survey, the state-owned Saudi oil company will price Arab Light crude for Asian customers at a discount of $5 a barrel below the regional benchmark for November, a significant widening from the $2 a barrel discount seen in October. This move defied expectations from traders and refiners polled by Bloomberg, who had previously anticipated that Aramco would raise prices by $5 a barrel for November.

The unexpected price reduction indicates that Saudi Arabia may be striving to drive sales in Asia as oil flows from the Middle East rebound following months of disruptions caused by the Iran war. Meanwhile, Bloomberg reported that Aramco increased its November crude prices for Europe by $3 a barrel while maintaining prices for the US at October levels.

Despite ongoing vessel attacks in and around the Strait of Hormuz, overall oil volumes passing through the vital waterway have risen over recent months. In mid-September, Saudi Arabia successfully sold nearly 100 million barrels of oil to Asian buyers, preventing a potential supply crunch. Additionally, the kingdom has repaired much of the East-West pipeline following earlier attack damage.

This operational recovery has driven a surge in Middle East oil exports. JPMorgan estimated last week that shipments have rebounded to 98 percent of prewar levels, according to Bloomberg. The East-West pipeline enables Saudi Arabia to move crude from its eastern oilfields directly to the Red Sea port of Yanbu, establishing a reliable alternative export route that bypasses the strait entirely.

Aramco's official selling prices govern crude supplied under long-term contracts to refiners, who typically gather their shipments from Ras Tanura on Saudi Arabia's Gulf coast. As one of the world's largest oil export terminals and a major refining facility, Ras Tanura handles a massive share of Saudi crude exports bound for markets in Europe and Asia, including China, Japan, and South Korea.

However, persistent shipping risks through the strait have led many customers to steer clear of the route. Consequently, Bloomberg reported that Aramco has instructed Asian refiners to submit volume nominations for November from ports inside the Arabian Gulf, as well as from Yanbu on the Red Sea and Sidi Kerir on Egypt's Mediterranean coast.