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

Saudi Arabia has made an unexpected move by slashing its November oil prices to Asia to six-year lows, while simultaneously raising prices for northwest Europe and the Mediterranean. The state-owned oil company Saudi Aramco set the November Arab Light crude oil official selling price to Asia at $5 a barrel below the average of Oman and Dubai prices, marking a $3 decrease from the previous month. This discount is the widest since June 2020, according to Reuters data, and contrasts with market expectations of a price hike.

The price cuts appear to be a strategic response to compensate buyers for soaring freight rates, which have surged to record highs. The cost of booking a very large crude carrier from the Gulf to China has reached $1.2 million a day, a stark increase from about $80,000 a day a year ago. Additionally, the lower prices aim to offset delays in cargo loadings from the Egyptian port of Sidi Kerir and longer voyage times for Saudi oil exported from there.

Saudi Aramco has also been selling millions of barrels of crude through ship-to-ship transfers outside the Strait of Hormuz, maintaining pre-conflict oil flow levels. The kingdom recently resumed loading at the port of Yanbu on the Red Sea following a brief suspension due to a drone attack on its key East-West oil pipeline. In contrast, Aramco raised the November official selling prices for northwest Europe by $3 a barrel across all grades, while keeping prices unchanged for buyers in the United States.