Saudi Arabia Slashes Oil Prices to Asia Amid Rising Freight Costs
Saudi Arabia has made a surprising move by slashing its crude oil prices for Asian buyers in November, marking the lowest levels in six years. The official selling price (OSP) for Arab Light crude to Asia was set at US$5 a barrel, a US$3 drop from the previous month and below the average of Oman and Dubai benchmark prices. This discount is the widest since June 2020, catching market participants off guard who had anticipated a price hike of up to US$5 a barrel.
The price cuts extend to Saudi Aramco's heavier grades, Arab Medium and Arab Heavy, with a US$5 a barrel reduction. Analysts suggest the cuts aim to compensate Asian buyers for elevated freight costs and secure market share amid disruptions caused by the US-Israeli war against Iran. Record freight rates, with a Very Large Crude Carrier costing up to US$1.2 million a day, have also influenced the decision.
Additionally, the kingdom has been managing ship-to-ship crude transfers outside the Strait of Hormuz and resumed loadings at the Red Sea port of Yanbu after a drone attack. Meanwhile, Saudi Aramco raised OSPs for north-west Europe by US$3 a barrel across all grades while keeping prices steady for US customers.