Aramco Slashes Oil Prices for Asia Amid Rising Freight Costs

Saudi Aramco has announced significant discounts on oil prices for Asian buyers next month, marking its largest reduction since the COVID-19 pandemic. The state-owned oil giant is offering an average discount of $5.24 per barrel against Oman and Dubai benchmarks for November, with heavy crude receiving the steepest cut at $7.35 below the benchmark price. This move is expected to dampen bullish sentiment in the oil market, according to Sasha Foss, an energy analyst at CSC Commodities.

The price cuts come as freight costs for transporting oil have surged, driven by disruptions in key shipping routes like the Strait of Hormuz and the Red Sea. Tanker charter prices have skyrocketed to nearly 30 times the 10-year average, exceeding $1 million per day for the first time. Freight costs for a trip from the Gulf to China now stand at around $30 per barrel, prompting Aramco to adjust its pricing to offset these increased expenses.

Aramco’s decision to lower prices is aimed at maintaining its market share in Asia, its largest export destination. Other Gulf producers, such as Iraq, have also offered substantial discounts, with Basrah Heavy selling at a discount of $37 per barrel. Despite ongoing threats to shipping in the Strait of Hormuz, Saudi Arabia has increased exports from its east coast, using shuttling to navigate the contested waterway.