Saudi Arabia slashes crude prices for Asia as exports recover

Saudi Arabia, the world's top oil exporter, sharply cut the price of its flagship crude grade for Asian buyers as flows through the Strait of Hormuz have picked up significantly while buyers face elevated freight costs amid the Iran war.

State oil company Saudi Aramco on Sunday lowered the official selling price for November shipments of its Arab Light crude to Asia -- the largest market for Middle Eastern oil -- by $3 a barrel to a discount of $5 a barrel to the Oman/Dubai benchmark.

Official selling prices are monthly rates set by national oil companies for term-contract customers and are typically pegged to regional crude benchmarks. The prices reflect demand from refiners and competition among exporters, making them a closely watched gauge of market conditions in key consuming regions.

The move comes as analysts say crude exports from the Middle East have returned to around prewar levels, with the region's major producers ramping up supplies through ship-to-ship transfers, alternative ports and pipelines. These increased flows are making more crude available to buyers, intensifying competition among producers.

At the same time, rising Gulf exports are pushing ship-to-ship operations in the Gulf of Oman closer to capacity limits, increasing demand for tankers and keeping freight rates elevated, according to data provider Kpler. Lower selling prices could help offset some of those higher costs for buyers.

"Brent-priced crudes are having a harder time competing in Asian markets," said Aaron Kildow, senior market strategist at Sparta Commodities.

Aramco also slashed November prices for its heavier crude grades sold to Asia by $5 a barrel. Prices for grades sold to Northwest Europe and the Mediterranean were, instead, raised by $3 a barrel, while prices to U.S. customers were left unchanged.

Saudi Arabia is loading crude from both its coasts -- the Persian Gulf and the Red Sea. Before the Iran war restricted exports through the Strait of Hormuz, the kingdom routed most of its oil via the narrow waterway to customers in Asia. That route is seeing a resurgence of flows, with crude shipments through Hormuz climbing from around 1.4 million barrels a day in late August to around 4.1 million last week, Kpler's ship-tracking data showed.

The kingdom has also resumed exporting oil via its East-West pipeline, which it has used to reroute most of its exports this year after the Iran war severely disrupted traffic through Hormuz. The pipeline was shut in mid-September following drone attacks but has since returned to flows of around 5.5 million barrels a day, Kpler estimates, leaving roughly 4 million barrels a day available for export from the Red Sea port of Yanbu.

For the market, the next key question is whether this pace can be sustained.

Yanbu loadings are expected to return to preattack levels by November, Kpler analysts said. However, security risks around the Bab al-Mandeb strait are pushing Yanbu cargoes onto the more costly route around the Cape of Good Hope. Frequent attacks by Yemen's Houthi militants on Saudi Arabia's west-coast facilities are adding further uncertainty around the sustainability of Yanbu exports.

Earlier on Sunday, Saudi Arabia and other OPEC+ allies agreed to keep oil production steady in November as security risks in the region remain elevated. Several vessels have come under attack in the Strait of Hormuz and around the coasts of Oman and Yemen in recent weeks.

Despite continuing tensions in the region, oil prices fell on Monday as recovering Middle East crude exports and the release of oil stocks by the Group of Seven countries eased immediate concerns over supplies. Brent crude, the global oil benchmark, was trading 0.2% lower at $102.07 a barrel, while West Texas Intermediate futures were down 0.8% to $90.40 a barrel.

Last week, the Group of Seven major economies agreed to release 100 million barrels of crude oil and diesel from their emergency stocks, a move aimed at easing supply pressures and bringing down prices as concerns grew over a potential U.S. ban on diesel exports. Hours after the agreement was announced, President Trump said the U.S. wouldn't impose such a ban, easing fears over further tightening in global markets and narrowing middle-distillate crack spreads -- a key measure of refinery profitability.