Saudi Arabia cut the price of its main crude grade for customers in Asia in August by the most in at least 26 years, as a surge of global supply heightens competition for buyers.
State producer Saudi Aramco will lower the price of its Arab Light oil to Asia next month by $11 a barrel to a $1.50 discount over the regional benchmark, according to a price list seen by Bloomberg. It’s a larger decline than the $8 drop expected in a Bloomberg survey.
Oil has plunged since the middle of June when the US and Iran reached an agreement to halt fighting and allow traffic to resume through the Strait of Hormuz, the key chokepoint that had been largely blocked since the start of hostilities. Brent crude has slumped to around $72 a barrel, where it was trading at the end of February when the US and Israel launched their campaign against Iran.
Middle Eastern crudes have declined as an impending wave of supply from the region threatens to overwhelm Asian refiners. Aramco at one point boosted its crude shipments to around 90% of pre-war levels after resuming exports from the Persian Gulf port at Ras Tanura.
Before the war, that was the main loading point for Saudi crude exports. Aramco diverted most of those flows to its Red Sea facility at Yanbu as the war effectively blocked Hormuz.
The OPEC producer group, led by Saudi Arabia and Russia, agreed to another modest oil quota increase in August. The group made largely symbolic increases in production levels during the war when Hormuz was still mostly shut and several Gulf member states had little scope to raise output. Now that traffic through Hormuz has eased, Gulf producers like the Saudis, Iraq and Kuwait, will be able to make use of their higher quotas, with the decisions to hike indicating that the group won’t hold members back from pumping.
