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

Amid a surge in global crude oil supply and intensified competition among regional buyers, Saudi Arabia has significantly lowered its official selling price (OSP) for crude oil to Asian customers, marking the first time it has sold at a discount since the 2020 oil price war.

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 directly 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 widely 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 industry 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 increasing 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. Large 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 increasing petroleum flow. The Strait of Hormuz is a core global oil transport route; the full resumption of navigation has directly released a massive amount of stranded oil sources.

Secondly, OPEC+ continues to release production capacity. Last weekend, seven core oil-producing countries issued an announcement confirming a daily increase of 188,000 barrels for 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 for external sale, further amplifying market supply.

Price adjustments cover long-term 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 long-term supply contracts, which are also the core channel for 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 industry environment of oversupply and fighting for customers, the market is widely watching the pricing strategies of other Middle Eastern oil-producing countries. Industry insiders predict that in the coming days, other major Middle Eastern oil-producing countries will successively announce new crude oil official selling prices, potentially 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 trend. 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 short-term oil price trends, and the market as a whole has entered a weak trend of oversupply.