Saudi oil giant unveils biggest oil price cut in 26 years

Saudi Arabia has sharply reduced the price of its flagship crude for Asian buyers, with state-owned energy giant Saudi Aramco announcing its largest monthly oil price cut in at least 26 years as a surge in global supply intensifies competition among producers, Bloomberg reports.

According to a pricing list published on July 6, Aramco will reduce the official selling price of its Arab Light crude for August shipments by $11 per barrel, placing it $1.50 below the regional benchmark. It marks the first time since the 2020 oil price war that the grade has been sold at a discount and the steepest monthly reduction in official selling prices since at least 2000.

The move reflects the rapid increase in oil exports from Persian Gulf producers following an interim US-Iran agreement that reopened the Strait of Hormuz, allowing tankers carrying millions of barrels of crude to resume shipments. The resulting influx of supply has pressured physical oil markets, with Brent crude surrendering all gains recorded during the recent conflict and spot crude trading at discounts not seen since the COVID-19 pandemic.

Despite the deeper-than-expected price reduction, several Asian buyers reportedly said Saudi crude remained more expensive than prompt cargoes available from other regional suppliers, suggesting that additional price cuts may be necessary if elevated supply persists.

Saudi Arabia, traditionally viewed as the stabilizing force in global oil markets, has alternated between production cuts and price wars over the past 15 years. The kingdom is currently increasing output gradually under agreements reached within the OPEC+ alliance.

Ahmed Mehdi, an oil analyst at Renaissance Energy Advisors, said the August pricing reflected "the overhang of prompt cargoes," adding that the sharp reduction was not evidence of a new price war but rather a consequence of "Hormuz's messy normalization."

He added that pricing would need to be "competitive enough to reinvigorate Chinese interest."

Aramco also reduced prices for other markets, cutting all crude grades supplied to Europe by $15 per barrel and lowering prices for US customers by $8 per barrel. The scale of the reductions is expected to increase pressure on other Middle Eastern producers, whose official pricing decisions are due in the coming days.

By Vafa Guliyeva