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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Middle East Oil Giants Face-Off In Market Share Skirmish

  • While Asian crude imports were relatively low in the third quarter due to high prices and COVID outbreaks, Middle Eastern oil producers are still fighting to dominate the region
  • Led by Saudi Arabia, oil producers across the Middle East continue to cut their prices in an attempt to ensure market share in the region
  • Crude from both Russia and the United States is only adding to the competition in Asian markets

The largest Middle Eastern oil exporters are fighting for market share on the most prized oil market, Asia, although Asian crude imports have been relatively low over the past three months.    The spike in the Delta variant of the coronavirus and the higher prices of Middle Eastern oil in the summer shrunk both Asia’s total crude oil intake and imports from Gulf producers amid cheaper alternatives. 

Chinese and overall Asian crude imports were sluggish in the third quarter of the year as higher prices, increased scrutiny over China’s independent refiners, and the summer COVID outbreak put the brakes on purchases. 

However, as the fourth quarter approached, the largest oil producers in the Middle East—led by the world’s top oil exporter Saudi Arabia—started to offer more oil to Asia thanks to the easing of the OPEC+ cuts and reduced the prices for their oil to stay competitive and regain market shares lost since the pandemic started. 

Estimates show that Asian crude oil imports continued to be unimpressive in September as higher benchmarks and higher official selling prices (OSPs) of the Middle East’s major producers had coincided with a flare-up of COVID cases at the time the September cargoes were nominated in June and July.  Related: Is It Time To Invest In Tidal Energy? China’s crude oil imports are estimated to have declined to an average of 9.62 million barrels per day (bpd) in September, down by 8.6 percent from the previous month, data from energy analytics provider OilX showed. Chinese crude imports last month continued to be weighed down by the stricter oversight on imports, refining operations, and market practices of refiners. In addition, Chinese economic activity moderated in September, further depressing crude oil imports, OilX’s oil analysts noted. 

Total Asian oil imports are estimated to have dropped to 22.99 million bpd in September from 23.24 million bpd in August, according to data from Refinitiv Oil Research cited by Reuters columnist Clyde Russell. Imports of crude into Asia in September were only marginally above the July imports of 22.61 million bpd. 

Higher prices were partly responsible for lower purchases in the third quarter, together with weaker fuel demand across Asia amid localized lockdowns to fight the Delta variant. 

The Saudis raised in August their prices for September, but had to compete against cheaper alternative crudes from the United States and Russia at a time when Asia, including China, were fighting the COVID resurgence. 

International benchmarks continued to rise at the start of the fourth quarter, but Saudi Arabia cut its OSPs for Asia for November, in a second consecutive price reduction, to keep its crude competitive in the top oil-importing region.

At the beginning of October, Saudi Arabia cut its OSPs for Asia for November by $0.40 per barrel for its flagship Arab Light grade, to a premium of $1.30 above the Dubai/Oman benchmark—the lowest premium since March. 

This was a second cut for Saudi prices in two consecutive months, after the price rise spurred by the OPEC+ decision to stick to monthly additions of 400,000 bpd rather than boosting output more to cap international prices.

Related: Canada’s Oil Stocks Are Trading At Bargain Basement Prices

Saudi Arabia, which generally sets the OSPs pricing trends for the other major Middle Eastern oil exporters, is now fighting for market share on the prized Asian market by lowering its crude prices. 

Saudi Arabia is also set to ship additional volumes of crude to at least three refiners in Asia in November, some of which had asked for full or incremental supply on top of the contractual volumes because of attractive prices, sources familiar with the matter told Reuters earlier this week. 

The United Arab Emirates (UAE), via its Abu Dhabi National Oil Company (ADNOC), plans to ship full volumes to customers in Asia in December, not making any cuts to contracted term supply for the first time since prices crashed last year, other sources told Reuters last month.

With the gradual easing of the OPEC+ cuts, the top oil producers in the Middle East are now offering more supply at more competitive prices to Asia in a bid to secure a larger share of the most important oil market in the world.      

By Tsvetana Paraskova for Oilprice.com

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