Saudi Arabia Set to Cut Crude Prices as Hormuz Reopens and Iranian Oil Bets Sink Prices

Crude is falling, and the people who buy diesel and gasoline by the truckload are about to feel it. Saudi Arabia looks set to slash its official selling prices now that the Strait of Hormuz has reopened, and traders are pushing prices down further on bets that more Iranian barrels are coming back to market. For refiners and the buyers downstream, cheaper feedstock is the story this week.

Crude

The reopening of Hormuz takes a fat risk premium out of the price. With the strait flowing again, Saudi Arabia is expected to cut its official selling prices, which sets the tone for what Asian and European refiners pay. On top of that, traders are betting on more Iranian oil reaching buyers, and that bet alone is enough to sink the front of the curve.

Iraq is pulling the other way. Baghdad wants a higher OPEC quota to feed a post-war production push, and it has even floated leaving OPEC, which is why the EU is now holding energy talks in Baghdad. A producer threatening to walk and pump more is not what a cartel trying to hold prices up wants to hear.

Refining

Two refineries are in trouble for very different reasons. Unionized BP workers picketed the company's Chicago headquarters this week, demanding an end to a 100-day lockout. A lockout that long pulls capacity and crews out of the system, and it is not resolved yet.

In Russia, drone strikes knocked out Moscow's main refinery, and the country is now importing jet fuel from Belarus at almost four times last year's rate. That is a producer of crude buying refined product because it can't run its own plants. The Kremlin is also leaning on Kazakhstan as its fuel crisis deepens.

Closer to home, RBN Energy flags big changes ahead in where and how Louisiana refineries source their crude. Worth watching if you buy product off the Gulf.

At the pump

The relief is showing up. Gas prices in Whatcom County fell below five dollars a gallon, and falling pump prices were part of the macro picture even as U.S. stocks dropped, with the WSJ noting AI fears offset the fuel-price relief. Lower crude feeds lower wholesale feeds lower retail, with the usual lag.

What to watch

Watch Saudi Arabia's official selling prices when they post, since that confirms how deep the cut goes. Watch whether Iraq actually moves on its OPEC threat or just uses it to squeeze more out of the Baghdad talks. And watch the BP Chicago lockout, because every week it drags on tightens Midwest supply.