Aramco Cuts Asia Oil Prices Amid Hopes For Hormuz Shipping Deal

Saudi Arabia has again reduced the price of its flagship crude for Asian buyers, driven by expectations of a deal facilitating more tanker movement through the Strait of Hormuz, which has pushed oil prices lower. Saudi Aramco will decrease the September official selling price for Arab Light by 50 cents per barrel, positioning it at a $2 discount to the regional benchmark. This price cut coincides with Iran's statement that an agreement with Oman on a shipping route through Hormuz is in its final stages. Brent crude has dropped to approximately $80 per barrel, representing a roughly 20% decline in two weeks, as traders speculate that more Persian Gulf barrels could soon enter the market.

Despite the prevailing optimism, Saudi exports through Hormuz continue to face constraints, and previous attempts to increase traffic have been met with renewed conflict and attacks on vessels. According to CEO Amin Nasser, Aramco has maintained exports at around 5 million barrels per day, which is about 70% of its normal volumes. The Kingdom has heavily relied on its Yanbu terminal on the Red Sea to sustain crude movement, while its primary Gulf terminal at Ras Tanura operates below typical export levels. However, Houthi threats near Bab el-Mandeb have rendered the Red Sea route less appealing, prompting Aramco to consider transporting cargoes through Egypt's SUMED pipeline and loading them at Sidi Kerir on the Mediterranean.

This rerouting presents its own challenges. Asian refiners had already pressed Saudi Arabia for discounts to compensate for the longer voyage around Africa and increased shipping costs. Aramco had previously raised prices for some Medium and Heavy grades destined for Asia, although these barrels typically originate from the Persian Gulf, making their pricing largely theoretical until shipping conditions improve. Conversely, Aramco cut prices for all crude grades heading to the United States, Northwest Europe, and the Mediterranean.