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Saudi Aramco gives Asian buyers its deepest Arab Light discount since 2020

Saudi Aramco priced its main Arab Light crude for Asian buyers in November at 5 dollars a barrel below the Oman-Dubai benchmark average, a discount 3 dollars wider than in October. Surveys of refiners and traders had pointed to a price increase instead. The cut came as Middle Eastern oil flows through the Strait of Hormuz recovered. Aramco raised its prices for northwest Europe by 3 dollars a barrel and left US prices unchanged.

Economics & Markets··Morning
A large tanker connected to a jetty by loading arms at an oil terminal on an arid Gulf coast, with shore-side storage tanks.

Arab Light discount widens for November cargoes

Saudi Aramco, Saudi Arabia’s state oil company, set its November Arab Light selling price for Asia at 5 dollars a barrel below the average of the Oman and Dubai benchmarks. The discount had been 2 dollars in October, making the monthly reduction 3 dollars. Reuters’ data put the November discount at its widest since June 2020. The company’s official selling prices govern crude delivered under long-term refinery supply contracts; the announced amount describes a discount to a benchmark average.[1], [2]

Refiners and traders surveyed before the decision had expected an increase. The Reuters survey pointed to 3 dollars a barrel, while Bloomberg’s survey pointed to 5 dollars. Those were different surveys rather than different announced selling prices. Aramco also cut Asian prices for the heavier Arab Medium and Arab Heavy grades by 5 dollars a barrel, applying deeper monthly reductions than for Arab Light.[1], [2]

Recovering flows face continuing shipping risks

Oil traffic through the Strait of Hormuz had recovered despite continuing attacks on vessels in and near the waterway. JPMorgan estimated the previous week that Middle Eastern shipments had reached 98 per cent of pre-war levels. Saudi Arabia sold almost 100 million barrels to Asian buyers in mid-September. The kingdom had also restored much of the flow through its damaged East-West pipeline, linking eastern oilfields to Yanbu on the Red Sea and providing an export route that avoids Hormuz. Aramco had also been considering discounts for oil loaded off Oman to compensate buyers for record freight charges, people familiar with the matter said the previous week.[2], [1]

Asian customers receive alternative collection options

Buyers would normally collect their crude at Ras Tanura, a major export terminal and refinery on Saudi Arabia’s Gulf coast. Continued risks along the Hormuz route led many customers to avoid that collection point. Aramco asked Asian refiners to nominate November volumes for collection in the Gulf, at Yanbu, or at Sidi Kerir on Egypt’s Mediterranean coast. Its destination-specific pricing also raised northwest European prices by 3 dollars a barrel across grades after Red Sea exports resumed. US buyers’ prices remained unchanged.[2], [1]

References

  1. News sourceReutersSaudi Aramco widens November Arab Light discount for Asia↩1↩2↩3↩4
  2. News sourceThe NationalSaudi Aramco cuts Asia prices as Middle Eastern oil flows recover↩1↩2↩3↩4
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