Hormuz navigation negotiations push Saudi Arabia to lower Asian crude oil prices

The Zhitong Finance App learned that Saudi Arabia lowered the price of its main crude oil sold to Asia. Meanwhile, the parties are negotiating an agreement aimed at easing the pressure on shipping in the Strait of Hormuz. However, the threat of attacks on ships by the Yemeni Houthis backed by Iran continues to disrupt the Red Sea waterway, putting Saudi crude oil at risk as an alternative to foreign shipping routes.

According to reports, pricing documents show that Saudi Aramco will cut the price of Arabian light crude oil sold to Asia by 50 cents per barrel next month, to 2 US dollars/barrel lower than the regional benchmark price. Traders had expected Saudi Aramco to keep the price of its flagship crude oil unchanged.

The price of Brent crude oil, the global benchmark, plummeted this week. Currently, the transaction price is close to 80 US dollars per barrel because the parties have resumed negotiations aimed at easing the pressure on shipping in the Strait of Hormuz. According to reports, Qatar said it has drafted a proposal to help normalize commercial shipping through the Strait of Hormuz, and both US and Iranian officials said progress has been made in negotiations to reopen this key energy transportation channel. Furthermore, Iran confirmed that it is close to reaching an agreement with Oman on a ship traffic plan in the Strait of Hormuz. Iran said it will establish a new traffic model different from the past 60 years in the Strait of Hormuz. At the same time, it said that the agreement has nothing to do with “immediate opening of the strait” and that the opening of the strait depends on whether the US can correct its “irregularities.”

Earlier, the war between the US and Iran blocked shipping in the Strait of Hormuz, disrupting the global crude oil market. Saudi Aramco quickly transferred most of its exports to the Red Sea port of Yanbu in the western part of the country, but Saudi crude oil exports via the Red Sea are facing an impact as the Houthis threaten to launch more attacks on oil tankers in the Red Sea.

Saudi Aramco CEO Amin Nasser said in an earnings conference call on Tuesday that so far, Saudi Aramco's crude oil exports have remained at around 5 million barrels per day, which is about 70% of the company's normal shipments.

He said, “In terms of crude oil exports, we are currently actively improving the optional space for transportation solutions, and related work is underway.”

According to the data, due to the war driving up oil prices, Saudi Aramco's second-quarter profit increased 33% to 33.4 billion US dollars, exceeding the combined profit of ExxonMobil and Chevron.

As of press release, the price of WTI crude oil rose 0.19% to 75.36 US dollars/share; the price of Brent crude oil rose 0.29% to 79.68 US dollars/barrel.