Aramco Deepens Asia Oil Discount Ahead of Possible Hormuz Deal

Saudi Aramco has further reduced the price of its primary crude for Asian buyers, potentially paving the way for a deal that would allow more tankers to pass through the Strait of Hormuz. The firm has lowered the September official selling price for Arab Light by 50 cents per barrel, creating a $2 discount compared to the regional benchmark.

This move comes after Iran reported that an agreement with Oman regarding a shipping route through Hormuz is nearing completion. Meanwhile, Brent crude has plummeted to approximately $80 per barrel, a 20% reduction over a two-week span, as traders anticipate an influx of Persian Gulf barrels into the market.

Nonetheless, Saudi exports through Hormuz are still hindered, and prior attempts to increase traffic have encountered renewed confrontations and attacks on vessels. Aramco has maintained exports at roughly 5 million barrels per day, which accounts for about 70% of normal volumes. The kingdom has heavily relied on Yanbu on the Red Sea to maintain crude flow while its primary Gulf terminal at Ras Tanura has been operating below normal export levels.

However, Houthi threats around Bab el-Mandeb have rendered the Red Sea route unappealing, compelling Aramco to consider sending cargoes via Egypt’s SUMED pipeline and loading them at Sidi Kerir on the Mediterranean. This rerouting process presents several challenges. Asian refiners had already urged Saudi Arabia for discounts to compensate for the longer voyage around Africa and higher shipping expenses.

Aramco has already increased prices for some Medium and Heavy grades intended for Asian markets, although these barrels usually depart from the Persian Gulf, rendering the pricing somewhat speculative until shipping conditions improve. Nonetheless, it has cut prices for all grades destined for the United States, Northwest Europe, and the Mediterranean.