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Oil price war: Gulf producers deepens Asia oil discount to record Low

by Staff Reporter
06 Feb 2015 at 07:31hrs | Views
A flame from a Saudi Aramco oil installion known as
(Reuters) - Saudi Arabia's move to slash the price it charges in Asia for its oil this week to the lowest in more than a decade is the latest aggressive action by Gulf states to defend market share in the world's top oil consuming region.

A price war between producers has raged since Saudi Arabia and its Gulf OPEC allies last November chose to keep their taps open in a bid for market share over price, sending oil prices down more than a third to under $50 a barrel in just two months.

Since then, Gulf producers - including Saudi Arabia and the United Arab Emirates - have steadily increased shipments to Asia, helped by low production costs that allow aggressive discounts, at the expense of West African and Latin American supplies.

Middle East exports to China, by far the region's biggest importer, increased 2.5 percent to around 3.8 million barrels per day (bpd) between December and January, with the market share improving to 53.9 percent from 52.2 percent in December, according to estimates by Thomson Reuters Oil Research and Forecasts.

"The Gulf states seem to be in this for the long haul. I think they will continue to make their crude competitive regardless of what happens in the market," said Richard Gorry, managing director of energy consultancy JBC Asia.

Saudi exports to China rose by 13 percent in January from the previous month, as the Asian country took advantage of low prices to stockpile, Reuters data shows.

Oil prices began tumbling in June 2014 when traders reacted to rising output around the world at a time of slowing demand, though have staged a partial recovery from six-year lows last week.

The increase in shipments has come mostly at the expense of producers such as Nigeria, Angola and Venezuela - and to a lesser extent Colombia and Brazil - which in recent years have boosted exports to Asia after U.S. import requirements were curbed by the shale boom.

Shipments from West Africa to China fell around 6 percent in January, while those from Latin America dipped 9 percent, the data shows.

Saudi Arabia cut its monthly oil prices on Thursday for Asian buyers to the lowest in at least 12 years, while raising prices to Europe and the United States.

Asia is the only major consuming region in which the Gulf dominates supplies. In Europe, Russia is the biggest supplier while the shale boom has sharply reduced U.S. import needs.

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Source - Reuters
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