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Page added on August 14, 2018
Saudi Arabia And Iran Reignite The Oil Price War
The rivalry between Saudi Arabia and Iran is becoming increasingly evident in the oil pricing policies of the two large Middle Eastern producers. The two countries are currently reigniting the market share and pricing war ahead of the returning U.S. sanctions on Iranian oil.
Saudi Arabia, OPEC’s largest producer, has been boosting oil production to offset supply disruptions elsewhere, including the anticipated loss of Iranian oil supply after U.S. sanctions on Tehran return in early November. The Saudis are also cutting their prices to the prized Asian market to lure more customers as they increase supply.
Iran, OPEC’s third-largest producer, is trying to convince its oil customers to continue buying Iranian oil despite stringent U.S. efforts to curb Iranian production.
Iran has slashed its official selling prices (OSPs) for all grades to all markets for September, looking to monetize what could be its last oil sales to some markets in Asia before the U.S. sanctions kick in. Tehran cut the prices for its flagship oil grades to more than a decade low compared to similar varieties of the Saudi crude grades, according to data compiled by Bloomberg.
Last week, the National Iranian Oil Company (NIOC) slashed the OSP for the Iranian Light crude grade to Asia by US$0.80 to US$1.20 a barrel above the Dubai/Oman average, used for pricing oil to Asia. The September prices for Iranian Light to Asia are at a 14-year-low compared to the similar Saudi grade sold to the world’s fastest-growing oil market, Bloomberg has estimated.
Earlier this month, the Saudis also slashed the September prices to Asia for their flagship grade, Arab Light, by US$0.70 to US$1.20 a barrel premium over the Dubai/Oman average. The reduction was slightly deeper than expected and the second consecutive monthly cut in pricing. The Saudis cut the prices for all their grades to all markets except for the United States.
Now Iran is also slashing prices for all grades to all markets, with the prices for Iranian Light, Iranian Heavy, Forozan, and Soroushgrades to Asia, Northwest Europe, and the Mediterranean all cut by between US$0.50 and US$1.45, depending on the market and grades.
The OSPs for Iranian Heavy and Forozan to Asia were slashed against the similar Saudi grades to their lowest levels since at least 2000, the year in which Bloomberg started compiling the data.
Iranian Light and the Saudi Arab Light for Asia for September are now priced at the same level—US$1.20 a barrel above the Dubai/Oman average.
For the Saudis, the cut is aimed at enticing more buyers in order to take advantage of the refiners in Asia that are looking to cut Iranian oil intake for fear of running afoul of the U.S. sanctions. For Tehran, the cut in prices is an attempt to keep refiners buying by offering yet another incentive for them on top of the extended credit periods and nearly free shipping.
It has also been reported that Iran has started to offer India—its second-biggest oil customer after China—cargo insurance and tankers operated by Iranian companies as some Indian insurers have backed out of covering oil cargoes from Iran in the face of the returning U.S. sanctions on Tehran.
India’s imports from Iran could start to slow from August as some big Indian refiners worry that their access to the U.S. financial system could be cut off if they continue to import Iranian oil, prompting them to reduce oil purchases from Tehran.
The U.S. hasn’t been able to persuade Iran’s biggest oil customer China to reduce oil purchases, but Beijing has reportedly agreed not to increase its oil imports from Iran.
Other relatively large Asian buyers of Iranian oil—South Korea and Japan—are looking for U.S. guidance and (possibly) waivers before deciding how to proceed, but they are currently very cautious and on the lookout for alternative supplies.
Analysts, and reportedly the U.S. Administration itself, currently expect the sanctions to remove around 1 million bpd from the oil market.
Considering the intensity of efforts by the U.S. to cut off as much Iranian oil exports as possible, it is unlikely that even Iran’s significant discounts to Asian customers will save the country’s oil exports.
By Tsvetana Paraskova for Oilprice.com
7 Comments on "Saudi Arabia And Iran Reignite The Oil Price War"
twocats on Tue, 14th Aug 2018 5:57 pm
hahaha! peak oil is slamming the world like a tsunami hitting a sandcastle and SA and Iran are basically GIVING it away. You seriously could not write this shit. No wonder peak oil theorists got it wrong – they are making predictions based on science and logic. this shit is pure monkey.
well at least the retirement funds of the wealthy will continue to get “funded” for another year. and developing countries will get to live a bulgarian level lifestyle for another couple of years.
Boat on Tue, 14th Aug 2018 8:19 pm
2cat
Giving it away? Remember just a few months ago that $40 oil? It’s now close to $70. Put the transion hormone pills down.
Cloggie on Wed, 15th Aug 2018 2:12 pm
New alliance brewing: Qatar invests $15B in Turkey, to help prevent collapse.
http://www.spiegel.de/wirtschaft/soziales/tuerkei-soll-15-milliarden-dollar-unterstuetzung-von-katar-erhalten-a-1223375.html
Strong rebound lira:
https://www.irishtimes.com/business/markets/turkish-lira-s-recovery-delights-markets-1.3596419
Davy on Wed, 15th Aug 2018 3:06 pm
Come on neder, they are buying up Turkish assets on the cheap and you think this is only friendship related. The lira is wounded and will never recover to its former place. Erdogan lusted for world leadership and sold his country out pretty much like Chavez. You better hope they remain whole. A balkenizing Turkey will be a real eye opener for your already wounded Europe.
makati1 on Thu, 16th Aug 2018 2:51 am
East up. West down:
“Economic War On Iran Is War On Eurasian Integration”
“The US sanctions offensive, launched after Washington’s unilateral pullout from the Iran nuclear deal, should be interpreted as an advance gambit in the New Great Game at whose center lies China’s New Silk Road – arguably the most important infrastructure project of the 21st century — and overall Eurasia integration.
es on in Tehran despite the threat of US sanctions. Photo: Anadolu Agency/Fatemeh Bahrami
Hysteria reigned supreme after the first round of US sanctions were reinstated against Iran over the past week. War scenarios abound, and yet the key aspect of the economic war unleashed by the Trump administration has been overlooked: Iran is a major piece in a much larger chessboard.
The US sanctions offensive, launched after Washington’s unilateral pullout from the Iran nuclear deal, should be interpreted as an advance gambit in the New Great Game at whose center lies China’s New Silk Road – arguably the most important infrastructure project of the 21st century — and overall Eurasia integration.
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The Trump administration’s maneuvers are a testament to how China’s New Silk Road, or Belt and Road Initiative (BRI), threaten the US establishment….
Echoing the Ancient Silk Road, Syria will be configured as an important BRI node, key to Eurasia integration.
In parallel, the Russia-China strategic partnership – from the intersection between the BRI and the Eurasia Economic Union (EAEU) to the expansion of the Shanghai Cooperation Organization (SCO) and the solidifying of BRICS Plus — has immense economic stakes in the stability of Iran.
The complex interconnection of Iran with both Russia (via the EAEU and the International North-South Transportation Corridor) and China (via BRI and oil/gas supplies) is even tighter than in the case of Syria in the past seven years of civil war….
Those clamoring for war with Iran cannot possibly understand that the nightmare scenario of a Strait of Hormuz/Persian Gulf energy transit closure – the choke point for 22 million barrels of oil a day – would represent, ultimately, the death of the petrodollar.
The Strait of Hormuz can be configured as the Achilles heel of the entire West/US economic power; a closure would detonate the mother of all hurricanes in the quadrillion-dollar derivatives market….
It’s not exactly a wise move to threaten China – especially with Beijing on an irresistible historical ascendancy. Nehru threatened China and lost a big chunk of Arunachal Pradesh to Chairman Mao. Brezhnev threatened China and faced the wrath of the PLA on the banks of the Ussuri River.
China is able to cut the US off in a minute from its rare earth exports, creating a US national security catastrophe. Now that’s when a trade war will enter real incandescent territory.”
http://www.atimes.com/article/economic-war-on-iran-is-war-on-eurasia-integration/
Slip slidin’…
makati1 on Thu, 16th Aug 2018 2:53 am
…es on in Tehran despite the threat of US sanctions. Photo: Anadolu Agency/Fatemeh Bahram… LOL delete.
BobInget on Thu, 16th Aug 2018 9:57 am
Turkey’s holding of US sovereign bonds saw a nearly 12-percent decline from May to June as Ankara seeks to diversify away from the US dollar amid an escalating diplomatic conflict with Washington.
In June, Turkey’s share of US Treasury securities dropped to $28.8 billion from $32.6 billion in the previous month, according to financial and political news aggregator Zero Hedge. Since the end of last year, the country has reportedly decreased its holdings of T-bills, bonds and notes by 52 percent.
Read more
Gold futures trading in Turkey doubles during lira’s wild rollercoaster ride
Earlier this year, a US Treasury report revealed that the Central Bank of Russia had sharply slashed the country’s holdings of US sovereign debt. The regulator linked the measure to increased concerns over various risks, including financial, economic and geopolitical. In May, Russia’s share hit an 11-year low and totaled just $14.9 billion. However, the latest data shows that Moscow slowed down its massive sell-off of US Treasury bonds with the figure remaining unchanged in June.
The conflict between Ankara and Washington was sparked by the detention of American pastor Andrew Brunson in Turkey. Brunson has been charged with assisting the failed military coup two years ago. He is facing 35 years in a Turkish prison.
Washington has introduced sanctions against Turkish officials and slapped the country’s steel and aluminum exports with extra tariffs. Ankara retaliated by applying tariffs on a number of US products including alcohol, tobacco and cars, while President Erdogan has called for a boycott of American electronic products.
The Turkish sell-off of the US debt will reportedly continue into August as relations with the White House continue to deteriorate.