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    This May. 3, 2009 file photo shows an oil facility in Jubeil, about 600 km from Riyadh, Saudi Arabia

    Saudi Arabia Set for Oil War Against Russia in Asian Market

    © AP Photo / Hassan Ammar, File
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    Russia has been the largest crude exporter to China for three months in a row, having surpassed Saudi Arabia. However, Riyadh responded with decreasing official oil prices to Asia. The kingdom is ready for an oil war with Russia in the Asian market.

    Russia has surpassed Saudi Arabia as China’s largest supplier of crude oil in May, according to customs data revealed in late-June.

    This marked the third month in a row the world’s biggest oil producer has topped the world’s biggest oil exporter in feeding China’s market, Reuters reported.

    In May, China imported 5.245 million tons of crude, or nearly 1.24 million barrels a day from Russia, breaking the previous record of 1.17 million barrels a day in April.

    At the same time, oil imports from Saudi Arabia reached 961,000 barrels a day in May, against one million barrels a day in April.

    Both Russia and Saudi Arabia consider China as the priority market. However, Chinese independent refiners, also known as "teapots," prefer the low-sulfur oil from Russia because of the smaller shipment size and geographical proximity to the refiners.

    The high-sulfur crude from Saudi Arabia and Iraq is less suitable for teapots due to the large cargo size and long-term contracts.

    China is encouraging cooperation between teapots and Russia by speeding up approvals for crude imports licenses and quotas for independent refiners, an article in the daily online publication American Thinker read.

    "Russian oil remains the teapots' top pick, suiting them in the way that teapots' throughput planning was often shorter-term that requires prompt deliveries," a senior China-based trader said.

    Meanwhile, Saudi Arabia announced it was cutting official oil prices for its Asian and American buyers.

    State-owned Saudi Aramco lowered its official selling price for Arab Light crude to Asia by 40 cents to a premium of 20 cents a barrel.

    "Saudi Arabia’s move to lower the official selling price will intensify competition with rivals such as Russia and the United Arab Emirates, who produce similar oil grades and are also looking for a bigger share of the market in Asia, the world’s top oil consuming region," an article in Asharq Al-Awsat newspaper read.

    It is hard to say whether the reduction of prices will further decrease already lowered incomes for Saudi Arabia because the kingdom is aiming for increasing its market share in Asia directly competing against Russia, according to American Thinker.

    "The kingdom, however, has responded by pumping and shipping more following an oilfield expansion, a move that traders say could pressure rival producers – such as the United Arab Emirates and Russia – and knock down prices in Asia," according to the newspaper.

    To sum up, Riyadh will leave the Asian market to Russia without struggle. Saudi Arabia has traditionally dominated the Asian market and will respond to the new challenge.


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    Oil, energy market, oil prices, Saudi Aramco, China, Saudi Arabia, Russia
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