Saudi Arabia lowered oil prices for Asia; market reacts
World oil prices fell after Saudi Aramco set an unexpectedly low price for its main grade for Asian buyers. The resumption of oil flows from the Middle East outweighed market fears due to renewed escalation in Yemen.
On Monday Brent slipped to around $101 per barrel, while US WTI traded near $90.
State-owned Saudi Aramco set the price of Arab Light for Asian customers for November at a discount of $5 per barrel to the regional benchmark. According to Bloomberg, this is the lowest level since 2020. The decision was unexpected for some traders and refiners who were counting on much stronger prices.
The change in pricing policy comes amid a gradual resumption of oil supplies from the region. In recent weeks, Saudi Arabia has been increasing flows through routes that bypass the Strait of Hormuz. This eased some of the fears of a physical shortage of crude that previously supported oil above $100 per barrel.
An additional signal for the market was the decision of seven OPEC+ countries not to increase production in November. Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman agreed to keep required production levels at September figures.
The parties to the agreement said they would continue to assess the market situation on a monthly basis. The next meeting is scheduled for November 1.
Meanwhile, further price declines are being contained by the situation in Yemen. The Riyadh-backed government has begun a large-scale military operation to retake territories controlled by Iran-backed Houthis. The escalation creates new risks for energy infrastructure and shipping near the Red Sea.
As a result, opposing factors are currently at play in the oil market. Restored supplies and lower Saudi prices are pulling crude cheaper, while fighting in Yemen and risks to key sea lanes keep a geopolitical premium in prices.
