Aramco deepens its Asian discount as refining margins become the constraint

A Reuters survey a week earlier had expected Asian prices to hold steady or fall by up to 2 dollars; Aramco chose the deep end of that range. The official selling price (OSP — the premium or discount to a benchmark that producers announce each month for each region) stood 2 dollars below Oman/Dubai in October and 5 dollars below in November. Adding a 2 dollar cut to November's 5 dollar discount should give 7 dollars, yet Reuters and BigGo report 6.50 dollars for December. Aramco's original price document could not be opened, so the discrepancy could not be verified.

Reuters attributes the cut to ample Middle East supply and weakening spot premiums; spot premiums for Middle East benchmark crudes returned to pre-war levels that week. Cooling Asian refining margins also blunted buyers' appetite. In the same week HSBC raised its forecast for Saudi fourth-quarter crude output from 6.3 million to 8.3 million barrels a day, and its 2027 forecast from 8.8 million to 9.8 million, citing a faster-than-expected recovery in exports.

The cut comes while tanker attacks continue in the Strait of Hormuz, and here the insurance constraint bites on the buyer's side. Brokers reported on 14 October that the additional war premium for a tanker entering the Gulf was 6–10% of hull value, reaching as much as 20 million dollars for a single supertanker voyage; those figures are 3 weeks old. The 6.50 dollar discount works as a way of refunding part of that delivery cost to Asian refiners. That reading is the desk's inference, not a statement from Aramco.