Saudi rebound lifts OPEC output toward pre-war levels

Saudi Arabia led a further recovery in Persian Gulf oil supplies in October, pushing OPEC's crude production back toward where it was before the war. A Bloomberg survey found output rose by 930,000 barrels a day last month to 22.8 million barrels a day. That is about 88% of what the same members pumped in February.bloomberg.com

The rebound is showing up in prices. Saudi Aramco cut its prices for Asian buyers to six-year lows, and banks are raising their supply forecasts. Together, these point to a market moving from shortage back toward surplus months after the US-Israeli war with Iran disrupted Gulf exports.

Aramco cuts prices for Asia

Aramco lowered its December official selling price for Arab Light crude to Asia by $2 a barrel from November. That puts it at a $7 discount to the Oman/Dubai average, according to the price list reported by Argaam and Quantum Commodity Intelligence. Reuters said this was the deepest Saudi discount for Asia since May 2020, during the pandemic.boereport.com+2

The company also cut December prices for all grades going to Northwest Europe and the Mediterranean by $1 a barrel and left US prices unchanged. In a Reuters survey the week before, traders had expected Asian prices to stay flat or fall by up to $2, given ample Middle East supply and weaker spot premiums, Reuters reported.boereport.com

Spot premiums for Middle Eastern crude returned to pre-war levels this week as producers increased exports. Shipments rose even as attacks on tankers crossing the Strait of Hormuz increased. Cooling refining margins in Asia also slowed buying, according to Reuters. Quantum Commodity Intelligence said the cuts again reflected soaring shipping rates and complex logistics.qcintel.com+1

Banks see supply returning

On November 4, HSBC raised its fourth-quarter forecast for Saudi crude production to 8.3 million barrels a day from 6.3 million, citing a faster-than-expected recovery in exports. It also raised its 2027 forecast to 9.8 million barrels a day from 8.8 million and expects output to reach about 10 million barrels a day by mid-2027, Oil & Gas Journal reported. According to Egypt Oil & Gas, HSBC said Saudi crude exports recovered to about 7 million barrels a day in October, close to pre-conflict levels.ogj.com+1

In a note the same day, JPMorgan said the global oil market has moved back into surplus after months of disruption. The bank pointed to recovering regional exports, higher output outside the Middle East and weaker consumption, Oil & Gas 360 reported.oilandgas360.com+1

Risks remain in Hormuz

The recovery is still exposed to risk in the Gulf. Shipping costs remain high, and tanker attacks near Hormuz continue. On November 6, Brent was nearing $100 a barrel amid a standoff and continued attacks, even as Gulf producers sold their barrels at deeper discounts to win buyers.qcintel.com