Aramco Cuts Asia Oil Prices to Six-Year Low, Raises Prices for Europe

Saudi Aramco has adjusted its November official selling prices with divergent moves across regions: it lowered the Asian price on Arab Light to a $5-per-barrel discount to the Dubai/Oman benchmark while lifting prices for European-bound cargoes by $3 per barrel, according to Reuters. The reduction for Asia represents a $3-per-barrel cut from the prior month and is the lowest Asian posting by Aramco since June 2020, per Reuters records. Allocations destined for the United States remain at October levels.

Market participants and analysts linked the Asian discount in part to a surge in shipping costs stemming from changes in how Saudi crude transits the Gulf region. To reduce the risk of Iranian attacks, Saudi Arabia has increasingly used ship-to-ship (STS) transfers in the Gulf of Oman: smaller vessels move crude out of the Persian Gulf, transit the Strait of Hormuz, and transfer cargoes to very large crude carriers (VLCCs) waiting off Oman. That procedure raises logistical complexity and freight expense for shipments headed mostly to Asia.

Data cited by Gulf News from Poten & Partners show freight costs for a VLCC have jumped to about $1.3 million per day, roughly 43 times higher than the roughly $30,000-per-day rate seen in January. Those higher transport expenses are translating into materially larger per-barrel delivery costs: freight now adds about $33 to the price of a barrel shipped from the Persian Gulf, up from $1.73 in January. In proportional terms, freight constitutes about 27% of a VLCC cargo’s delivered cost today versus about 3% at the start of the year.

Those shifts in shipping economics are being reflected in Aramco’s regional pricing differentiation, with the firm trimming Asian netbacks while slightly raising European offers. The company’s moves underscore how elevated logistical costs and region-specific demand conditions are affecting crude pricing decisions among major producers this month.