Saudi Arabia is poised to cut its flagship crude price to Asia by as much as $8 a barrel in July, the second monthly reduction, as Chinese refiners slash imports.
Back
Saudi Arabia to cut July crude prices $3-$8 as Asian demand falters
Saudi Arabia is expected to cut its flagship Arab Light crude price to Asia by $3 to $8 a barrel for July, a second consecutive monthly reduction, as weakening Chinese demand and easing supply fears undercut the war premium built since the Strait of Hormuz disruptions.
"A deep price cut for Saudi oil is needed to attract demand," one of five survey respondents told Reuters, as Chinese buyers have been lifting less Saudi crude in May and June given their refining losses under current high prices.
The July OSP for Arab Light may settle at a premium of $7.50 to $12.50 a barrel above the Dubai and Oman average, down from $15.50 in June, according to the Reuters survey. Cash Dubai's premium to swaps averaged $8.90 a barrel so far this month, sliding from $13.92 in April, after spiking to a record above $60 in March when the US-Iran war disrupted shipping through the Strait of Hormuz. Brent crude futures have since fallen below $100 a barrel this week on reports of a potential ceasefire deal.
The price cuts signal that the supply disruption premium is fading faster than expected, even as energy flows through the Strait of Hormuz remain far below pre-war levels. If demand from China — the world's largest crude importer — continues to soften, Saudi Arabia may need to sustain or deepen discounts in the months ahead, potentially dragging Brent and WTI benchmarks lower and offering relief to oil-importing economies across Asia.
China's demand crunch deepens
Chinese refiners have been slashing processing runs and reducing crude imports as high feedstock costs erode margins. The pullback marks a sharp reversal from early 2026, when China was expected to drive global oil demand growth. Instead, the country's refiners are now absorbing less Saudi crude, forcing Riyadh to redirect flows through the Red Sea port of Yanbu after the Hormuz closure restricted Gulf shipping. The last time Saudi Arabia cut OSPs for two consecutive months was during the 2020 pandemic demand collapse, when Arab Light premiums briefly turned negative.
Broader economic spillover
The demand weakness extends beyond China. The International Labour Organization warned this week that a sustained 50 percent rise in oil prices could cost 14 million full-time equivalent jobs globally in 2026 and 38 million in 2027, with Asia-Pacific working hours projected to fall 0.7 percent this year and 1.5 percent next year. The Philippines' PSEi index plunged 1.73 percent to 5,859.94 on Thursday, while the peso weakened to P61.595 per dollar, as renewed US-Iran military exchanges dampened hopes for a near-term diplomatic settlement. Regional currencies across Asia also softened, with the Japanese yen sliding toward 159.8 per dollar and the Indian rupee weakening to near 95.7.
Saudi Aramco typically releases its OSPs around the fifth of each month. The company, as a matter of policy, does not comment on pricing decisions.
This article is for informational purposes only and does not constitute investment advice.
