Key facts
- Aramco cut November oil prices for Asian buyers by $3 per barrel to a discount of $5 per barrel to the Dubai/Oman benchmark.
- The discount is the lowest since June 2020.
- Prices for European-bound cargoes were increased by $3 per barrel for November.
- Prices for Saudi oil grades sold to the United States remained unchanged from October.
- Shipping costs for VLCCs on the Hormuz route have soared to $1.3 million per day, a 43-fold increase since January.
Saudi Aramco has reduced its November crude oil prices for Asian customers to the lowest level in six years, while simultaneously increasing prices for European buyers. This pricing adjustment reflects a significant surge in shipping costs, particularly for routes transiting the Strait of Hormuz.
The discount offered to Asian buyers for Arab Light crude will be $5 per barrel below the Dubai/Oman benchmark, a level not seen since June 2020. This cut amounts to a $3 per barrel reduction from the previous month's pricing.
Conversely, Saudi oil grades destined for Europe will see a price increase of $3 per barrel for November. Prices for shipments to the United States remain unchanged from October.
Analysts suggest the price cut for Asia is a strategic response to escalating shipping expenses. The security situation in the Strait of Hormuz has led Saudi Arabia to employ ship-to-ship transfers in the Gulf of Oman to mitigate risks from potential Iranian attacks. This method involves offloading crude from Persian Gulf vessels onto Very Large Crude Carriers (VLCCs) positioned off the coast of Oman, a process that has dramatically increased transportation costs.
Data from Poten & Partners indicates that the freight cost for a VLCC has reached an unprecedented $1.3 million per day, a stark contrast to the approximately $30,000 per day seen in January. This surge means freight costs now constitute about $33 per barrel of oil shipped from the Persian Gulf, compared to $1.73 in January, representing 27% of the delivered cost for a VLCC cargo, up from 3% earlier in the year.