Saudi Arabia is expected to slash the official selling prices of its crude loading for Asia in August, as Middle East’s crude benchmarks crashed amid the tentative reopening of the Strait of Hormuz and the oil supply increase from the region.

Meanwhile, global crude oil prices have continued decline following the reopening of the Strait of Hormuz which has eased the tension in the conflict between the United States and Iran.

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Saudi oil giant Aramco, the world’s single-biggest crude oil exporter, is expected to slash the OSP of its flagship Arab Light crude by between $6.50 and $8.00 per barrel, a Reuters survey of industry sources showed on Friday.

Refiners polled by Reuters expect the prices of all other Saudi grades, Arab Extra Light, Arab Medium, and Arab Heavy, to be also cut by $6.50 and $8.00 per barrel for August compared to July.

Such cuts to the prices would set Arab Light’s price for Asia for August at a premium of only $1.50 to $3 a barrel above the average Dubai/Oman prices, the benchmark for Middle East oil, off which producers price their supply for Asia.

The average price for July loadings of Arab Light was set early this month at a premium of $9.50 per barrel over the average Oman/Dubai quotes, after Aramco slashed the price for July by $6 per barrel compared to June.

The expected additional cut in prices for August would push the Arab Light price down to a four-month low versus the Dubai/Oman benchmarks as Middle Eastern supply rebounds and the physical and futures prices of Oman, Dubai, and Murban crudes crash.

The spot premiums of prices of the Dubai, Murban, and Oman crudes to swaps slumped into discounts last week after the market began pricing in an imminent reopening of the Strait of Hormuz following the tentative U.S.-Iran agreement.

This week the Dubai cash premium to swaps and the Oman spread to swaps slumped to their lowest level in six years.

Moreover, supply from the Middle East is rising with major producers including temporarily-desanctioned Iran boosting exports.

Saudi Arabia is also preparing to resume crude loadings at Ras Tanura in the Persian Gulf, which will further boost its supply that currently ships out of the Red Sea port of Yanbu.

Lower oil prices for August could incentivize Asian demand for Saudi crude after months of supply disruptions.

Meanwhile, global crude oil markets are heading for their sharpest quarterly decline since the COVID-19 pandemic, as easing geopolitical tensions in the Middle East trigger a broad sell-off and erase much of the risk premium that had supported prices.

Brent crude is on course to record a decline of more than 30% during the second quarter, marking its biggest quarterly slump since the first quarter of 2020 when pandemic lockdowns sent global fuel demand into freefall.

According to exchange data compiled by Bloomberg, Brent prices have also fallen by roughly 20 per cent in June alone.

The latest downturn follows a memorandum of understanding signed by the United States and Iran in mid-June to continue negotiations toward a broader peace agreement by August.

The diplomatic breakthrough has eased fears of prolonged supply disruptions, encouraging traders to unwind positions built around geopolitical risk.

Both Brent and West Texas Intermediate (WTI) crude have now retreated to levels seen before the outbreak of hostilities involving Iran earlier this year, reflecting growing confidence that crude exports through the Strait of Hormuz will continue to normalize as tanker traffic gradually resumes.

The rapid decline in oil prices has prompted several major investment banks to lower their price forecasts, betting that improving regional stability will support uninterrupted energy flows. However, analysts caution that financial markets may be underestimating the possibility of renewed disruptions if tensions flare up again.