17:36 GMT +320 October 2019
Listen Live
    Khaled al Otaiby, an official of the Saudi oil company Aramco watches progress at a rig at the al-Howta oil field.

    Saudi Arabia Paves Way for Oil Market Competition With Russia

    © AP Photo / JOHN MOORE
    Opinion
    Get short URL
    355
    Subscribe

    The Saudi monarchy is going to great lengths to increase its share of the Asian crude oil market, according to an expert.

    MOSCOW (Sputnik) — 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.

    He 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.

    Additionally, 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 views and opinions expressed in the article do not necessarily reflect those of Sputnik.

    Related:

    Cautious Optimism: Forecaster Predicts the Worst is Over for the Ruble
    Depression in the Desert? Riyadh Reels as Oil Prices Plummet
    Iraq Warns of New Drop in Oil Prices Without Agreement to Cut Production
    Oil Prices Not Even Close to Rock Bottom – Jim Rogers
    Saudis Seek to Increase Oil Prices 'By Fuelling Conflicts in Middle East'
    Tags:
    Oil, oil prices, Niu Song, Arthur Berman, Iran, Russia, Saudi Arabia
    Community standardsDiscussion
    Comment via FacebookComment via Sputnik