Saudi national oil company Saudi Aramco has slashed its official selling prices for Asian-bound cargoes in August by a whopping $11 per barrel, almost double the expected cut.

Marking the first time since 2020 that Saudi barrels in Asia trade at discounts to regional benchmarks, Aramco’s drastic price cut brings its flagship Arab Light $1.50 per barrel below Oman/Dubai. Chinese demand for Saudi barrels is yet to recover after nominations for June collapsed to just 14 million barrels (470,000 b/d), the lowest reading on record, whilst flows to the United States have dried up completely. 

Faced with plunging European demand, Saudi Aramco dropped its formula prices by an even more formidable $15 per barrel, marking the largest monthly OSP reduction for both Asia and Europe since at least 2000. Saudi Arabia is taking its time to bring back all its idled production capacity – even though Aramco restarted loadings in the Gulf port of Ras Tanura, flows are relatively low around 1 million b/d in July to date, well below the pre-war rate of 6 million b/d.      

/OIlPrice/