Saudi Arabia Set to Cut June Oil Prices by Up to $12 a Barrel as War Premium Evaporates

Key facts

• Saudi Arabia likely to cut June OSPs for Asia by $5–$12 per barrel, per a Reuters survey of four industry sources.
• Arab Light June OSP forecast at $7.50–$14.50 per barrel above Dubai/Oman quotes, down from May's record level.
• Cash Dubai premium fell to $9.17 on Monday from a war-driven high of over $60 in March.
• Dubai's average premium in April is $15.22, less than half of March's $38.30.
• Chinese refiners plan to buy only 20 million barrels from Saudi Arabia in May, the lowest on record.
• Saudi Aramco has rerouted exports through the Red Sea port of Yanbu to bypass the Strait of Hormuz.
• The UAE announced its departure from OPEC effective this Friday, citing a desire to boost production flexibility.
• GCC leaders met in Jeddah without UAE President Mohamed bin Zayed to discuss regional security after Iranian strikes.

War Premium Collapses as Spot Market Cools

Saudi Arabia is poised to slash its official crude selling prices for Asian buyers in June by as much as $12 a barrel, retreating from the record highs set after the US-Israeli conflict with Iran disrupted supply. The expected reduction reflects a sharp weakening in the physical spot market since late March, when panic buying drove premiums to historic levels. The June OSP for Arab Light crude, the kingdom's flagship grade, may settle at a premium of $7.50 to $14.50 a barrel above the average Dubai and Oman quotes, according to a Reuters survey of four industry sources. That would represent a drop of $5 to $12 from May's pricing, which was the highest on record. The wide range of forecasts underscores lingering uncertainty among Asian buyers, whose supply and price expectations have diverged since the war upended trade flows.

Dubai Premiums Halved as Replacement Cargoes Arrive

The cash Dubai premium to swaps fell to $9.17 on Monday, down from a historical high of more than $60 in March, Reuters data show. So far in April, Dubai's premium has averaged $15.22 a barrel — less than half of March's average of $38.30. Spot Oman premiums have followed a similar trajectory. The softening of physical crude prices has occurred even though the conflict shows no sign of ending. Demand has cooled after an initial wave of panic buying, while replacement cargoes from the United States, West Africa and elsewhere are expected to start arriving from late April. Refiners in India and Southeast Asia have also increased purchases of Russian crude under US waivers, further easing supply pressures.

Chinese Refiners Slash Purchases to Record Low

China, the top buyer of Saudi crude, has sharply reduced its intake. Chinese refiners plan to buy just 20 million barrels from Saudi Arabia in May, the lowest volume on record, after the kingdom hiked its May price to an all-time high. The cutback comes as Chinese refiners face squeezed margins: rising feedstock costs have outpaced fuel price hikes, while Beijing has curbed refined fuel exports. To maintain flows despite the conflict, Saudi Aramco has rerouted exports through the Red Sea port of Yanbu, bypassing the volatile Strait of Hormuz. The company, as a matter of policy, does not comment on its pricing decisions. Saudi OSPs are typically released around the fifth day of each month.

UAE Quits OPEC as Gulf Leaders Meet in Jeddah

The price cut announcement comes amid a dramatic reshuffling of Gulf energy politics. The United Arab Emirates abruptly announced its departure from OPEC, effective this Friday, in a move that Abu Dhabi says was not influenced by other members. The decision allows the UAE to escape the group's production quota system and prioritize flexibility to pump more oil to finance its economic growth. The announcement coincided with a consultative meeting of Gulf Cooperation Council leaders in Jeddah — the first in-person gathering since the region was drawn into the Iran war two months ago. The UAE was represented by Foreign Minister Abdullah bin Zayed, not President Mohamed bin Zayed. The talks focused on the fallout from Iranian missile and drone attacks targeting civilian infrastructure across the Gulf. Leaders jointly condemned the strikes as a violation of sovereignty and called for tighter coordination to protect regional security.

Reopening the Strait of Hormuz Faces Three Hurdles

Even if a ceasefire is reached, reopening the Strait of Hormuz will require overcoming three major obstacles, according to a Bloomberg report. A coalition of more than 30 countries led by Britain and France is grappling with mine clearance, naval protection, and shipping insurance. The strait, through which about a fifth of global oil passes, has been effectively closed since the conflict began, forcing Saudi Arabia and other Gulf producers to find alternative export routes. The disruption has reshaped global crude flows, with replacement barrels from the US, West Africa, and Russia filling gaps. The longer the strait remains closed, the more entrenched these new trade patterns become, potentially eroding Saudi Arabia's market share in Asia.

Saudi Arabia Defends Market Share Amid Competitive Pressure

The expected price cuts are a defensive move by Riyadh to retain its position in Asia, its largest market. The arrival of cheaper replacement cargoes from the US and West Africa, combined with increased Russian crude purchases by Indian refiners, has intensified competition. Saudi Aramco's ability to reroute exports through Yanbu has helped maintain volumes, but the price premium it can command has evaporated. A senior UAE diplomatic advisor, Anwar Gargash, was quoted by Reuters as saying that the GCC's response to the crisis has been 'the weakest in history.' The criticism highlights the broader challenge facing Gulf states: balancing security concerns with economic imperatives as the war reshapes energy markets.

Outlook: Price Normalization and Structural Shifts

The collapse of the war premium signals a return toward pre-conflict pricing dynamics, but structural shifts may persist. The UAE's exit from OPEC could lead to higher production and further downward pressure on prices, while the prolonged closure of the Strait of Hormuz is accelerating the diversification of supply routes. For Saudi Arabia, the immediate priority is to defend market share in Asia, where Chinese demand remains weak and alternative suppliers are gaining ground. In the longer term, the kingdom's ability to influence global oil prices may be tested as new producers and trade corridors emerge. The June OSP decision will be closely watched as an indicator of Saudi Arabia's pricing strategy in a rapidly changing landscape.

The bottom line

• Saudi Arabia is expected to cut June OSPs for Asia by $5–$12 per barrel as war-driven premiums fade.
• Dubai's cash premium has collapsed by over 50% in April, reflecting cooling demand and new supply.
• Chinese refiners cut May Saudi crude purchases to a record low of 20 million barrels.
• The UAE's exit from OPEC adds uncertainty to the group's production discipline.
• Reopening the Strait of Hormuz requires mine clearance, naval protection, and insurance solutions.
• Saudi Aramco has successfully rerouted exports via Yanbu to bypass the Strait of Hormuz.