Saudi Arabia Makes Deepest Oil Price Cut for Asia in 20 Years
Aramco slashes August Arab Light prices as demand weakens and supply improves.
Saudi Arabia has cut the price of its main crude grade for Asian buyers in August, as demand weakens and tensions ease. This is the biggest price reduction in more than 20 years.
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The move comes as the world’s largest crude exporter faces pressure from softer demand in Asia and better supply conditions after the easing of geopolitical tensions in the Middle East.
State-owned Saudi Aramco lowered the official selling price of its Arab Light crude for Asian customers by $11 per barrel for August delivery. This means the grade is now priced at a $1.50 discount to the regional benchmark, according to a pricing document cited by Bloomberg. The cut was larger than the $8-per-barrel drop expected by analysts.
Oil prices have fallen sharply from the highs seen during the recent Israel-Iran conflict. Prices eased after the fighting stopped and shipping through the Strait of Hormuz returned to normal, which reduced concerns over supply disruption. Brent crude is now trading at around $72 per barrel, after giving up much of the war-related risk premium.
At the same time, refiners in Asia are likely to receive more Middle Eastern crude as exports return to normal levels. During the conflict, Saudi Aramco redirected shipments from its Red Sea terminal at Yanbu after operations through the Persian Gulf were affected.
With navigation through Hormuz back to normal, exports from Saudi Arabia’s main Gulf facilities have recovered. This has increased crude availability in the region.
The supply outlook has also improved after the OPEC+ alliance agreed to raise production quotas for August. As Gulf producers can now export freely through Hormuz, countries including Saudi Arabia, Iraq and Kuwait are expected to lift output. This will add more oil to the market and increase competition for market share in Asia.
AI contributed to the creation of this article.