Aramco Slashes Asian Oil Prices to Six-Year Low Amid Shipping Cost Surge

Saudi Aramco has adjusted its oil prices for November, raising them for European buyers while slashing them for Asian customers to a six-year low. Analysts had anticipated price increases, but the move caught many off guard. For Asian buyers, Aramco will offer Arab Light at a $5 per barrel discount to the Dubai/Oman benchmark, marking the lowest price since June 2020. Meanwhile, European buyers will see a $3 per barrel increase across all oil grades, while U.S. prices remain unchanged from October.

The discount for Asian buyers appears to be a strategic response to rising shipping costs along the Hormuz route. To mitigate risks from Iranian attacks, Saudi Arabia has adopted ship-to-ship transfers in the Gulf of Oman. This process involves smaller vessels transporting crude through Hormuz before offloading onto larger tankers, driving up freight costs. The cost of transporting crude from the Persian Gulf to Asia has surged significantly as a result.

Freight costs for very large crude carriers (VLCCs) have reached an all-time high of $1.3 million per day, up 43 times from January’s rate of $30,000 per day. These higher shipping expenses add approximately $33 to the price of each barrel of oil, compared to just $1.73 in January. As a result, freight costs now account for 27% of the delivered cost for a VLCC cargo, a sharp increase from 3% earlier this year.