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Mexico Moves To Ramp Up Oil Production

After decades of dredging through…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Saudis Cling To Market Share By Ramping January Oil Exports To Asia

Amid talks for an OPEC-wide production cap, Saudi Aramco is planning to export more crude to Asia in January, according to three unnamed sources from the client side who spoke to Reuters. The move aims to help Saudi Arabia maintain its market share whatever the output agreed next week at the Vienna meeting of the group.

The report suggests that Saudi Arabia is rushing to ensure no change in its Asian market share, since under usual circumstances, it wouldn’t have finalized the export allocations until mid-January.

Meanwhile, Bloomberg yesterday reported that Asian clients have been buying more oil from non-OPEC producers, which could have been a factor in Saudi Arabia’s decision to raise exports.

U.S. shale oil and North Sea blends have been shipped to Asian markets as the contango in oil futures deepens. As Bloomberg explains, both sides benefit from the situation: the U.S and European sellers because the journey of their cargoes is longer and its value rises in line with futures prices; the Asian buyers because despite this rise in value, the European and U.S. crude is still cheaper than UAE and Qatar blends thanks to an hefty supply of oil from the Atlantic Basin.

In this context, it has become really vital for OPEC to reach a deal on the internal adjustment of production. Its long-term effectiveness, however, remains doubtful. Again yesterday, Russia’s Energy Minister Alexander Novak told media that a freeze at current levels of production is all Russia can offer. According to him, this freeze amounts to an output reduction based on previous plans for 2017, given Russia had plans to raise the current production rate to new records next year.

OPEC itself needs to cut its output by 1.1 million bpd, and as Novak told reporters, had asked non-OPEC producers to contribute a 500,000-bpd cut. For Russia, Novak explained, this would mean a reduction of 200,000-300,000 bpd on what’s planned as the average daily production for 2017.

By Irina Slav for Oilprice.com

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