Saudi Aramco cuts Asia crude prices to six-year low amid recovery as oil flows rebound

Saudi Aramco has reduced the prices it charges for Arabian Light crude to Asian customers, marking a six-year low, as oil shipments through the Strait of Hormuz rebound. The state-owned oil company will sell the grade at a $5 discount below the regional benchmark in November, a move that is wider than the $2 discount it offered in October, according to a Bloomberg survey.

Traders and refiners were anticipating a $5 price increase from Aramco for November. This price cut suggests Saudi Arabia's intent to increase sales to Asian markets as oil flows from the Middle East recover following months of disruption caused by the Iran war. In contrast, Aramco increased prices by $3 for November for European buyers, while keeping prices for the US the same as October.

Despite ongoing attacks on vessels in and around the Strait of Hormuz, the volume of oil passing through the waterway has grown in recent months. In mid-September, Saudi Arabia shipped nearly 100 million barrels of oil to Asian buyers, helping to stave off a potential supply shortage. The kingdom has also reactivated a significant portion of its East-West pipeline, which was damaged in an attack.

The recovery has led to an increase in oil exports from the Middle East, with JPMorgan estimating that shipments have reached 98 percent of prewar levels. Aramco's official prices apply to crude supplied under long-term contracts to refiners, who typically collect their shipments from Ras Tanura, a Gulf coast port that is home to one of the world's largest oil export terminals and a major refining facility.

Cargoes from the port typically head to markets in Europe and Asia, including China, Japan, and South Korea. However, continued risks to shipping through the Strait of Hormuz have led many customers to avoid the route. Aramco has requested Asian refiners to submit nominations for the volumes they plan to collect in November from ports inside the Arabian Gulf, Yanbu on the Red Sea, and Sidi Kerir on Egypt's Mediterranean coast.