Saudi Arabia unexpectedly cuts oil prices to Asia

Saudi Aramco has reduced the price of its benchmark oil grade to buyers in Asia to a six-year low of US$5 a barrel below the regional benchmark for November, according to the producer. This is a significant decrease from the US$5 increase in price that traders and refiners had expected from October. The unexpected price cut suggests that the world's largest oil exporter may be attempting to increase sales to Asia, along with other Persian Gulf producers.

While there are still frequent attacks on ships in and around the Strait of Hormuz, the amount of oil passing through the waterway has rebounded over the past few months. In addition, Saudi Arabia has restored much of the flows through the East-West pipeline, which was damaged by an attack. This has led to an increase in crude exports from the Middle East, with JPMorgan Chase & Co estimating that they are at 98% of pre-war levels.

Aramco offers crude for sale under long-term contracts to refiners who would typically collect the barrels at Ras Tanura within the Persian Gulf. However, due to the ongoing risk of passage through the Strait of Hormuz, many customers are avoiding this route. This has forced producers to ship their cargoes through the Gulf of Oman instead.

To accommodate this shift, Asian refiners were instructed by Saudi Aramco to submit nominations for the volumes they wish to purchase next month from various ports in the Persian Gulf, as well as the Red Sea port of Yanbu or the Mediterranean port of Sidi Kerir.