Key Points
- Aramco has offered spot crude cargoes to European buyers for October and November loading
- The offers follow an attack that shut the East-West pipeline and halted Yanbu exports
- Added Saudi barrels have already pushed some European crude grades lower this week
The latest:
Saudi Aramco has put additional crude cargoes up for sale on the spot market to European refiners for loading this month and next, a person familiar with the matter told Bloomberg, as the company moves to replace barrels lost when its main export pipeline was shut. The October cargoes were offered at a discount to Aramco’s official selling price. Aramco did not immediately respond to a request for comment.
Details:
- The offers: The person, who asked not to be identified discussing unannounced information, said Aramco floated cargoes for late-October loading earlier this month, then followed last week with additional supply available for delivery during November. Loading would come either from Sidi Kerir on the Mediterranean or from Yanbu on Saudi Arabia’s Red Sea coast.
- The pricing: October barrels were offered below the official selling price Aramco sets for its crude, according to the same person. Discounting on the spot market is a departure from the company’s usual reliance on term contracts, under which a large share of its European volumes normally moves.
- What triggered it: Aramco had earlier told European refiners they would receive no term-contract cargoes during October, after an attack on the pipeline linking the kingdom’s eastern oil fields to its west coast. The strike disrupted exports from Yanbu, the Red Sea terminal that feeds Mediterranean and European buyers.
- The restart: The East-West pipeline has since resumed operations, allowing Aramco to lift its exports again and ease the supply squeeze in the European market. The company told European refiners this month they would receive their full allocated November volumes under long-term contracts, according to other people familiar with the matter.
- Market impact: The increase in Saudi supply contributed to lower prices for some European crude grades this week, traders in the market said. Uncertainty over deliveries during the outage had already pushed European refiners to step up spot-market purchases to cover volumes normally secured under term deals.
- The baseline: Saudi Arabia typically ships an average of 700,000 to 800,000 barrels a day of crude to Europe, based on vessel-tracking data compiled by Bloomberg. Most of that moves under long-term contracts rather than through spot sales.
- Saudi output: The kingdom raised oil production by roughly a third in September to more than 8 million barrels a day, recovering from the lowest level in over three decades the previous month. The United Arab Emirates lifted output to a record in September, according to the International Energy Agency.
- Regional picture: Middle East crude exports overall have climbed back toward pre-war levels despite continuing attacks on key infrastructure and on tankers near the Strait of Hormuz. Iraqi exports have also moved close to the levels recorded before the conflict began.
Between the lines:
Aramco discounting spot barrels while simultaneously restoring full term allocations points to a supplier working to win back European refiners whose October deliveries were cancelled. The combination of restored pipeline flows, higher Saudi output and record Emirati production explains why added volumes translated so quickly into weaker European grade prices.
What’s next
Watch whether Aramco extends spot offers into December, whether November term cargoes load in full from Yanbu, and the next International Energy Agency readings on Saudi and Emirati production.
