Aramco drops oil price for Asian buyers

• Biggest discount since Covid
• Freight costs drive price cuts
• Hormuz risks reshape routes

Saudi Aramco will sell oil to Asian markets next month at its highest discount since Covid.

The Saudi state-owned energy company is offering an average cut of $5.24 per barrel against Oman and Dubai benchmarks, according to its pricing sheet for November.

Heavy crude will receive the biggest discount, selling at $7.35 below the benchmark price.

It is Aramco’s largest discount since 2020, when oil prices slumped during the Covid-19 pandemic.

Such a drop from the world’s largest oil exporter could make traders less bullish on crude, said Sasha Foss, energy analyst at London investment company CSC Commodities. He attributed some of the fall in oil prices on Monday to the news.

”The Saudi official selling price is very widely watched as a marker for sentiment,” he said.

The price cuts are an apparent attempt to offset customers’ increased freight costs, which have spiked in recent months. Tanker charter prices are now almost 30 times the average over the last 10 years, surpassing $1 million a day for the first time due to disruptions in the Strait of Hormuz and the Red Sea.

Freight costs for a trip from the Gulf to China are now around $30 a barrel.

• Global oil stockpiles are ‘scarily thin’, says Aramco chief
• Saudi oil exports hit wartime high after pipeline flows resume
• Gulf-China supertanker freight nears 30% of oil price

Asia is Aramco’s largest export market. The company did not reduce prices to its other destinations.

Other sellers in the Gulf have offered larger cuts, such as Iraq, which is now selling Basrah Heavy at a discount of $37 per barrel.

Saudi Arabia has increased exports from its east coast in recent weeks, using shuttling to get oil through the contested Strait of Hormuz.

Oil exports are now approaching pre-war levels despite continued threats to shipping in the waterway, analysts told AGBI.