Saudi Arabia Slashes November Oil Prices to Asia to Six-Year Lows

Saudi Arabia has made a surprising move by slashing its November oil prices for Asian buyers to six-year lows. The official selling price (OSP) for Arab Light crude oil to Asia was set at US$5 a barrel, a US$3 drop from the previous month. This price is now below the average of Oman and Dubai benchmark prices, marking the widest discount since June 2020. Market participants had anticipated a price increase of up to US$5 a barrel, making the cut a significant shock.

The decision appears aimed at compensating Asian buyers for elevated freight costs and protecting Saudi market share amid disruptions caused by the US-Israeli war against Iran. Saudi Aramco also cut prices by US$5 a barrel for its heavier grades, Arab Medium and Arab Heavy, sold to Asia. The move follows recent gains in Middle Eastern benchmarks, which had led to expectations of a price hike.

Additionally, Saudi Aramco raised November OSPs for north-west Europe by US$3 a barrel across all grades, while keeping prices unchanged for US customers. The sharp cuts come as the cost of booking a Very Large Crude Carrier from the Persian Gulf to China has surged to US$1.2 million a day, up from approximately US$80,000 a day a year ago. The lower OSPs may also compensate buyers for longer voyages and loading delays for Saudi crude exported via the Egyptian port of Sidi Kerir.

Since September, Saudi Aramco has conducted millions of barrels in ship-to-ship crude transfers outside the Strait of Hormuz, restoring oil flows to pre-conflict levels. The kingdom also resumed crude loadings at the Red Sea port of Yanbu following a brief disruption caused by a drone attack on its East-West pipeline.