Market reports indicate that Saudi Arabia has significantly reduced the official selling price for its main crude grades to Asian customers for August, marking the largest cut in at least 26 years. This move comes as a surge in global supply intensifies competition for buyers.
According to a price list, Saudi Aramco has lowered the price of its Arab Light crude for August exports to Asia by $11 per barrel, setting it at a discount of $1.50 per barrel to the regional benchmark. This reduction is steeper than the $8 per barrel cut anticipated in a survey of industry analysts.
Crude oil prices from the Middle East have been declining recently. After resuming exports from its Ras Tanura port in the Persian Gulf, Saudi Aramco had increased crude shipments to approximately 90% of pre-conflict levels. With the US and Iran reaching a ceasefire agreement, international oil prices have retreated to pre-conflict levels.
This development could signal a cyclical reversal for airline stocks. Recently, Goldman Sachs upgraded its outlook for the international airline industry. The firm cited robust demand for air travel, which has remained strong despite airlines raising fares to offset higher fuel costs. Consequently, Goldman Sachs raised its net profit forecasts for the airline sector for the third and fourth quarters of 2026 by 24% and 32%, respectively.
A research report from Guojin Securities notes that the most critical investment thesis for airlines in the second half of 2026 is that the market has largely priced in the impact of high oil prices. However, the potential earnings rebound from moderating oil prices and the pricing power from a tight supply-demand balance have not been fully reflected. If oil prices trend downward, the sector could swiftly shift from a state of "suppressed profits" to one of "realized profit expansion."
Zhongtai Securities suggests that airline stock prices may evolve through three subsequent phases. The first phase is expectation recovery, where easing geopolitical tensions and a retreat from high oil prices repair the negative fundamental outlook caused by rising crude costs. The second phase is operational recovery, where a substantial decline in the oil price benchmark after a full restoration of jet fuel supply genuinely alleviates cost pressures and boosts capacity utilization. The final phase is earnings recovery, where the crude oil disruption is completely resolved, leading to an upward shift in airline profit margins. Stock prices would then be driven primarily by improved industry supply-demand dynamics and the release of corporate earnings potential.
Companies related to the aviation industry chain include China Eastern Airlines Corporation Limited (HKG: 00670), China Southern Airlines Company Limited (HKG: 01055), Air China Limited (HKG: 00753), BOC Aviation Limited (HKG: 02588), and TravelSky Technology Limited (HKG: 00696).
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