Saudi Arabia has lowered its crude oil prices to Asia to a six-year low, with November prices $5 below benchmark.

The world's largest crude oil exporter is actively vying for market share in Asia, with Saudi Aramco unexpectedly lowering its official selling price for Arab Light crude oil to Asian buyers to a six-year low.

Saudi Aramco recently announced that its Arab Light crude oil pricing for Asian buyers in November will be at a discount of $5 per barrel to the regional benchmark price, a significant increase from the $2 per barrel discount in October . This price adjustment far exceeded market expectations; according to a previous Bloomberg survey, the market had originally anticipated that Saudi Arabia would raise its Asian selling price by approximately $5 per barrel.

In contrast to the significant price cuts for Asian buyers, Saudi Aramco simultaneously raised its November prices for European buyers by $3 per barrel, while keeping prices unchanged for US buyers . According to JPMorgan Chase estimates, Middle Eastern crude oil exports have recovered to 98% of pre-war levels, with Persian Gulf oil-producing countries accelerating supply to the market.

Improved Hormuz corridor, Middle East exports recover

Although attacks around the Strait of Hormuz still occur from time to time, crude oil traffic through the waterway has been steadily increasing in recent months. Meanwhile, Saudi Arabia's crude oil shipments via the East-West pipeline have recovered to over 80% of their capacity.

According to a Bloomberg report last week, exports have risen to wartime highs, partly due to Saudi Arabia reducing its supply to domestic refineries, thus freeing up more export capacity.

Saudi Aramco's official pricing targets long-term contract buyers who typically pick up their goods at the port of Ras Tanura in the Persian Gulf. However, due to the lingering risks of the Hormuz Corridor, many customers are choosing to bypass this route, forcing oil producers to transship their goods via Hormuz to the Gulf of Oman for delivery, thus increasing operating costs.

According to an internal Saudi Aramco document obtained by Bloomberg, the company has notified its Asian refineries that they can submit declarations for next month's deliveries from ports in the Persian Gulf, Yanbu on the Red Sea coast, or Sidi Kerir in the Mediterranean. This move is a clear contingency plan in response to the scenario of a continued closure of the Strait of Hormuz.

The situation in the Middle East continues to escalate. The Saudi-backed government forces in Yemen have launched a full-scale military operation against Houthi-controlled areas. Despite an overall recovery in crude oil exports, the pressure on the shipping market from regional tensions has not subsided. Ship shortages and transportation risks in combat zones have jointly driven up shipping costs, which remain high.

For the market, Saudi Arabia's significant price cuts for Asian buyers, coupled with the rapid recovery of Middle Eastern exports, will further test the support level of current international crude oil prices. Asian refineries may benefit from this, but geopolitical uncertainties remain a key variable affecting supply expectations.

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