Page 11 - FSUOGM Week 16
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FSUOGM POLICY FSUOGM
Russia, Saudi Arabia continue battle for market share, despite proclaimed truce
RUSSIA
Russia and Saudi Arabia continue to battle for market share, particularly in Asia.
RUSSIA and Saudi Arabia, despite pledging steep cuts to their oil production earlier this month, have continued to wage war for market share.
Saudi Aramco has cut its official selling prices (OSPs) to Asian customers in May by $3-5 across all its grades, Reuters reported this week. Asia has seen demand recover as lockdowns have been eased. Russia is also a major supplier to the region, shipping oil to customers using the 1.6mn barrel per day (bpd) ESPO pipeline that connects fields in EasternSiberiatotheFarEasternportofKoz- mino. ESPO also connects to a spur that runs into central China.
Iraq, the UAE and Kuwait has similarly low- ered rates for oil due for delivery to Asia next month.
Saudi price reductions, and an increase in supplies to Asia, have caused Russia’s eastbound grades Sokol and ESPO to plunge, Reuters reported. The two blends usually trade at a high premium to the Dubai benchmark, but are now at record discounts.
“Beyond the co-operative statements the fight is still going on,” a trading source told Reuters.
Aramco’s price cuts in Europe have been smaller in comparison, and it has even jacked up the price for some of its heavier grades. However, it is expected to increase sales to the continent to
more than 29mn barrels in April – just under the all-time record set in August 2016, according to Refinitiv shipping data.
Aramco’s grades includes Arab Light, which is similar to Russia’s flagship grade Urals. Saudi shipments are increasing to Italy, Turkey, Greece, France and Poland this month, all of which are regular buyers of Russian oil.
“As demand is falling the competition gets even tougher,” a source at a European refiner told Reuters. “Saudis don’t mind going the extra mile for the buyer. Maybe Russia also should think of specialoffers.”
Russia’s sprawling network of pipelines into Europe gives it an edge over the kingdom, allow- ing it to deliver its crude cheaply.
“Russian oilfields are connected to refineries in Europe and Asia and oil companies have long- termcontractswiththem,”aEuropeanoiltrader told Reuters. “Unlike Saudi Arabia, it is not sub- ject to freight rates and vessels available.”
On the surface there has been a rapproche- ment between Russia and Saudi Arabia, since the pair reached a landmark deal earlier this month with other OPEC+ members to take 9.7mn bpd of global supply offline. The two countries have each agreed to lower production to 8.5mn bpd next month, from a 11mn bpd baseline level, and have even suggested deepening cuts if necessary.
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