Oil, Gold, Tin and Coffee: What Moved Commodity Markets Today

Commodity markets started the week with a lot of news. Saudi Arabia cut oil prices for Asia to a six-year low. High shipping costs are boosting US refiners. Gold is holding near $4,000, tin has slipped, and coffee may get cheaper. Here is a plain guide to the biggest stories.

Saudi Arabia cuts oil prices for Asia

Saudi Aramco has lowered its December price for Arab Light crude sold to Asian buyers by $2 a barrel. The new price is $6.50 below the Oman/Dubai average. That is the lowest level since May 2020, when the pandemic crushed demand.

Aramco also cut prices by $1 a barrel for Northwest Europe and the Mediterranean. Prices for the US did not change.

Traders had expected no change or a cut of up to $2. Middle East supply is plentiful, extra payments for spot cargoes have weakened, and Asian refining profits have cooled. Producers have raised exports even though tankers crossing the Strait of Hormuz face more attacks.

HSBC now expects Saudi output of 8.3 million barrels a day in the last three months of this year, up from its earlier forecast of 6.3 million. It expects output to reach about 10 million by mid-2027.

Why US refiners are winning

The conflict with Iran has pushed up the cost of moving oil by sea. Before the war, about one-fifth of the world's oil and liquefied natural gas passed through the Strait of Hormuz. Now ships face danger, higher insurance bills and longer routes.

US Gulf Coast refiners benefit from this. They can buy cheaper heavy crude from nearby Canada and Venezuela, while Asian rivals pay much more to ship similar oil. Valero says freight from the US Gulf Coast to Asia has jumped to $30-$35 a barrel, from about $5 a year ago. US refining profits more than doubled in the third quarter.

Higher shipping costs have also pushed Canadian heavy crude further below the US benchmark, known as WTI. Phillips 66 says each $1 of extra gap adds about $140 million to its profit. Many refiners booked ships before the war, so they avoided the price spike. Phillips 66 alone secured more than 40 vessels.