The surprise cut is a bearish signal for Middle East crude in Asia. It shows Aramco prioritising volumes and market share over price as regional exports recover to near pre-war levels. Competing Gulf producers may come under pressure to follow, and Asian refiners are likely to take more Saudi term barrels, which could weigh on Dubai-linked spot grades. The deeper $5 cut to medium and heavy grades points to particular weakness in sour crude demand, or a determination to place those barrels. The split with Europe, where prices rose $3, shows how the Hormuz route now carries a real cost: Asian buyers are being compensated for freight and security risk that Red Sea cargoes avoid. For Brent, still around $100, this reinforces the view that physical supply is loosening even as the risk premium lingers.---Saudi Arabia was expected to charge Asia more and charged it less instead, which says more about winning back buyers than about the oil price itself.Summary:Aramco cut November Arab Light to Asia by $3 to $5 below Oman/Dubai, the widest discount since June 2020.Surveys had expected a hike of $3 to $5. Arab Medium and Arab Heavy were each cut by $5.Prices for Europe and the Mediterranean rose $3 after Yanbu exports resumed. US prices were unchanged.Hormuz risks and record freight are pushing buyers away from Ras Tanura loadings. JPMorgan puts Middle East exports at 98% of pre-war levels.The explainer covers how official selling prices work and why the market watches them.Saudi Aramco has unexpectedly cut the price of its flagship crude for Asian buyers to the widest discount in more than six years, Reuters and Bloomberg (gated) reported. The move comes as Middle East exports recover and Riyadh moves to protect its share of its most important market.The state oil company set its November official selling price for Arab Light to Asia at $5 a barrel below the Oman/Dubai benchmark average. That is a cut of $3 from October and the deepest discount since June 2020. Traders and refiners surveyed by the two news organisations had expected an increase of between $3 and $5, in line with gains in Middle Eastern benchmarks. Heavier grades were cut further, with Arab Medium and Arab Heavy each reduced by $5. Aramco raised prices for northwest Europe and the Mediterranean by $3 across all grades after resuming exports from its Red Sea port of Yanbu, and left US prices unchanged.What is an official selling price?Most Saudi crude is sold to refiners under long-term contracts rather than on the spot market. Each month Aramco publishes an official selling price, or OSP, for every grade and region. That price sets what contract buyers pay for the following month's cargoes.The OSP isn't a fixed dollar figure. It's expressed as a premium or discount to a regional benchmark. For Asia, that benchmark is the average of Oman and Dubai crude prices. Europe and the Mediterranean are priced against ICE Brent, and US cargoes against the Argus Sour Crude Index. A discount of $5 to Oman/Dubai therefore means buyers pay $5 less than the benchmark average for the loading month, whatever the headline oil price happens to be.Why the market watches itSaudi Arabia is the region's largest exporter, so its OSPs are widely treated as a signal of how Riyadh reads demand, and other Gulf producers often take their cue from them. A cut usually suggests Aramco wants to sell more barrels or sees weaker buying interest. A rise suggests it believes buyers will pay more.Grade differences matter too. Lighter crudes typically command higher prices because they yield more valuable products, such as petrol and diesel. That is why Arab Light trades above Arab Medium and Arab Heavy.Why this month's cut stands outThe war has changed the economics of collecting Saudi crude. OSPs assume cargoes are loaded at Ras Tanura inside the Gulf, but with passage through the Strait of Hormuz still risky, many buyers are avoiding the route. Producers have instead been ferrying cargoes out and transferring them to tankers in the Gulf of Oman, while freight rates sit near record highs. People familiar with the matter told Reuters that Aramco has been looking at discounts for oil loaded off Oman to compensate buyers.At the same time, supply is returning. JPMorgan estimated last week that Middle East crude exports were at 98% of pre-war levels, helped by repairs to Saudi Arabia's East-West pipeline. Aramco cut prices for Asia while raising them for Europe, where Yanbu cargoes avoid Hormuz altogether. That suggests it is pricing in the risk and cost Asian buyers face, in a bid to keep them. This article was written by Eamonn Sheridan at investinglive.com.