Saudi Arabia has reduced the price of crude oil supplied to Asia in November 2023 to its lowest level in six years. This decision, contrary to previous forecasts, was made to compensate for heavy transportation costs and export disruptions.
Reduction in Arab Light Crude Oil Prices
According to published information, the official selling price of Arab Light crude oil for delivery in Asia has been set at $5 per 159 liters lower than the average price of Oman and Dubai crude. This discount has increased by $3 per 159 liters compared to the previous month, and the price gap in November 2023 is unprecedented since June 2020.
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Previous surveys indicated that market participants expected a maximum increase of $5 in the official price, which aligned with the rise in Middle Eastern benchmark oil prices. However, Saudi Arabia's decision completely contradicted these forecasts.
Price Increase for Europe
Alongside the price reduction in Asia, Aramco, the largest crude oil exporter in the Middle East, also reduced the official selling price of heavier grades to Asia for November 2023 by the same amount. Additionally, the official selling price of all grades to Northwestern Europe has increased by $3 per 159 liters this month, and rates for the Mediterranean region have also risen.
These changes occur particularly as transportation costs for oil have risen, and Aramco is striving to maintain its market share. In recent weeks, informed sources have indicated that Aramco is considering offering oil loaded in waters near Oman at a discount to offset unprecedented transportation costs.
Given the increase in transportation costs, data shows that the cost of chartering a very large crude carrier with a capacity of about 318 million liters of oil from the Persian Gulf to China has reached $1.2 million per day; a figure that was estimated at around $80,000 per day last year.
Saudi Arabia has also resumed loading at the Yanbu port in the Red Sea after a brief pause, and Aramco has sold hundreds of millions of liters of crude oil through ship-to-ship transfer outside the Strait of Hormuz since September, restoring oil flows through this strategic waterway to pre-conflict levels.
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