Saudi Arabia slashes Asian crude oil prices, marking the biggest cut in 26 years

A leaked pricing list shows that Saudi Aramco will deliver Arab Light crude oil next month with the official selling price cut by $1.10 per barrel, representing a discount of $1.50 per barrel relative to the regional benchmark. Reviewing historical market trends, Saudi Arabia has only adopted a discount sales model during the two rounds of oil price wars in 2015 and 2020; this price adjustment immediately reflects the rapid expansion of global crude oil supply.

This magnitude of reduction marks a new high in at least 26 years, far exceeding the $0.80 per barrel cut broadly predicted by market analysts. Previously, geopolitical conflicts in the Middle East disrupted shipping through the Strait of Hormuz, causing international crude oil prices to surge significantly. However, the current supply-demand dynamic has completely reversed, and the intensity of the price cut has exceeded sector expectations.

Multiple factors drive higher crude oil supply; unblocking of shipping lanes combined with increased production exert double pressure

This round of crude oil oversupply is catalyzed by multiple events, placing continuous and growing pressure on the market.

Firstly, a temporary agreement between the US and Iran was reached in mid-June, lifting export restrictions on Gulf oil-producing countries. substantial amounts of crude oil previously stranded in the Persian Gulf due to geopolitical conflicts have re-entered global circulation channels via the Strait of Hormuz, significantly growing petroleum flow. The Strait of Hormuz is a core global oil transport route; the full resumption of navigation has immediately released a massive amount of stranded oil sources.

Secondly, OPEC continues to emit production capacity. Last weekend, seven core oil-producing countries issued an announcement confirming a daily increase of 188,000 barrels to August. This marks the fifth consecutive month that major oil-producing countries have implemented production increase plans, continuously adding to market supply.

With the resumption of transport channels, Saudi Arabia has adjusted its export layout simultaneously: during the conflict, the country transferred some crude oil exports to the Yanbu port on the Red Sea; now that Persian Gulf shipping has resumed, Saudi Arabia has rarely released spot crude cargoes to external sale, further amplifying market supply.

Price adjustments cover prolonged contract customers; Saudi crude oil spot competitiveness still has shortcomings

The August crude oil pricing released by Saudi Aramco this time primarily targets Asian customers with prolonged supply contracts, which are also the core channel to Saudi crude oil exports.

Multiple crude oil traders reported that even with this significant reduction in the official selling price, Saudi crude oil quotes remain higher than spot circulating oil prices from other Middle Eastern oil-producing countries, holding no advantage in spot market competition.

In an sector ecological stability of oversupply and fighting to customers, the market is broadly watching the pricing strategies of other Middle Eastern oil-producing countries. sector insiders predict that in the coming days, other major Middle Eastern oil-producing countries will successively announce new crude oil official selling prices, possibly initiating price-cutting competition in unison.

Unblocking of shipping lanes erases war premium; Brent crude falls to $72 mark

Following the effectiveness of the US-Iran temporary agreement, international crude oil began a continuous downward direction. All oil price gains accumulated during the geopolitical conflict have been completely given back with the resumption of navigation through the Strait of Hormuz.

As of this Tuesday, Brent crude trading prices fell back to around $72 per barrel. The logic of oil price support brought by the war has completely disintegrated; a loose supply side dominates immediate oil price trends, and the market as a whole has entered a weak direction of oversupply.