The Saudi monarchy is going to great lengths to increase its share of the Asian crude oil market, according to an expert.
© REUTERS/ ESSAM AL-SUDANI
Iraq Oil Ministry Warns of New Drop in Oil Prices Without Agreement to Cut Production
Oil-rich Saudi Arabia is gearing up for all-out competition with Russia for a bigger presence in Europe and Asia oil markets amid the continued slump in crude prices, experts told Sputnik on Monday.
The Saudi oil giant Aramco announced last week that it would cut oil prices for Europe, apparently in preparation for Iran’s resumption of oil exports to the region later this year.
However, Arthur Berman, director of Labyrinth Oil Consulting Services in Texas, told Sputnik that Russia, the largest oil exporter to Europe, was likely the real target of Saudi Arabia’s oil policy.
"The largest exporter to Europe is Russia with 1.66 mmbpd [million barrels per day], compared to Saudi Arabia with 0.89 mmbpd, so market share competition with Russia seems the most likely target," Berman said.
© FOTOLIA/ SERGEY_P
Cautious Optimism: Forecaster Predicts the Worst is Over for the RubleHe added that Iran remains a "great unknown" in this competition as far as volumes go, but more of Iran's oil is heavy than light.
By contrast, Aramco said that light crude prices for the Asian market in February would rise by $0.60 per barrel compared to January.
Niu Song, a research associate at Shanghai International Studies University’s Middle East Institute, said that Riyadh’s decision to hike crude prices in Asia, while preserving the current volumes of oil exports, has already had a great influence on Russia.
"Russia is increasing oil extraction so as to grab an even bigger share of market," Song said. "Oil wars continue to rage between Russia and Saudi Arabia, especially in the Chinese market."
He added that the Saudi monarchy is going to great lengths to increase its share of the Asian crude oil market. Saudis have invested heavily in the Chinese, Korean and Japanese oil industry in a bid to bind the Asia Pacific to its exports, Song explained.
© FLICKR/ JUBER AL-HADDAD
Depression in the Desert? Riyadh Reels as Oil Prices PlummetAdditionally, a price hike would help Saudi Arabia refill its coffers after oil prices fell by 34 percent in 2015. International Monetary Fund (IMF) chief Christine Lagarde predicted that oversupply will keep the oil prices significantly below $100 a barrel in the mid-term.
James Nixon, chief European economist at Oxford Economics, a commercial venture with Oxford University’s business college, told Sputnik that the recent news from Saudi Arabia, including Aramco’s hint at a possible share sale, reflects the growing stress caused by lower oil prices to the Saudi budget.
"What the Saudis have done is reduce the discount for their light crude to the Dubai benchmark to just 80 cents (from $1.40) previous. I think a reduction in the spread is inevitable given the lower level of prices," Nixon said.
He predicted that in the long term the oil market would continue to be oversupplied. A return to flow equilibrium is therefore unlikely until at least the end of 2017.
The Saudi oil giant Aramco announced last week that it would cut oil prices for Europe, apparently in preparation for Iran’s resumption of oil exports to the region later this year.
However, Arthur Berman, director of Labyrinth Oil Consulting Services in Texas, told Sputnik that Russia, the largest oil exporter to Europe, was likely the real target of Saudi Arabia’s oil policy.
"The largest exporter to Europe is Russia with 1.66 mmbpd [million barrels per day], compared to Saudi Arabia with 0.89 mmbpd, so market share competition with Russia seems the most likely target," Berman said.
© FOTOLIA/ SERGEY_P
Cautious Optimism: Forecaster Predicts the Worst is Over for the RubleHe added that Iran remains a "great unknown" in this competition as far as volumes go, but more of Iran's oil is heavy than light.
By contrast, Aramco said that light crude prices for the Asian market in February would rise by $0.60 per barrel compared to January.
Niu Song, a research associate at Shanghai International Studies University’s Middle East Institute, said that Riyadh’s decision to hike crude prices in Asia, while preserving the current volumes of oil exports, has already had a great influence on Russia.
"Russia is increasing oil extraction so as to grab an even bigger share of market," Song said. "Oil wars continue to rage between Russia and Saudi Arabia, especially in the Chinese market."
He added that the Saudi monarchy is going to great lengths to increase its share of the Asian crude oil market. Saudis have invested heavily in the Chinese, Korean and Japanese oil industry in a bid to bind the Asia Pacific to its exports, Song explained.
© FLICKR/ JUBER AL-HADDAD
Depression in the Desert? Riyadh Reels as Oil Prices PlummetAdditionally, a price hike would help Saudi Arabia refill its coffers after oil prices fell by 34 percent in 2015. International Monetary Fund (IMF) chief Christine Lagarde predicted that oversupply will keep the oil prices significantly below $100 a barrel in the mid-term.
James Nixon, chief European economist at Oxford Economics, a commercial venture with Oxford University’s business college, told Sputnik that the recent news from Saudi Arabia, including Aramco’s hint at a possible share sale, reflects the growing stress caused by lower oil prices to the Saudi budget.
"What the Saudis have done is reduce the discount for their light crude to the Dubai benchmark to just 80 cents (from $1.40) previous. I think a reduction in the spread is inevitable given the lower level of prices," Nixon said.
He predicted that in the long term the oil market would continue to be oversupplied. A return to flow equilibrium is therefore unlikely until at least the end of 2017.
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