(Reuters) - Even as Saudi Arabia
and its Gulf OPEC allies appear united in their refusal to cut output to
boost global oil prices, they are becoming locked in an increasingly
fierce battle to secure market share in Asia.
Oil prices have
slumped below $50 a barrel, the weakest since 2009, triggering a price
war between producers to secure customers in Asia. And the price outlook
remains grim with Goldman Sachs slashing its three-month benchmark
crude forecasts to just above $40.
The United Arab Emirates (UAE) last week joined Kuwait and Iraq in pricing crude they sell to Asia below that of OPEC's top producer Saudi Arabia.
discounts show how Gulf members, who account for more than half of OPEC
output, are prepared to take on each other to retain market share and,
in so doing, put more pressure on global oil prices.
a fight for the market," said Tushar Bansal of consultancy FGE, who
says Gulf producers such as the UAE are prepared to stomach lower prices
to hold their market share.
UAE's Abu Dhabi National Oil Company (ADNOC) set the official selling
price (OSP) for flagship grade Murban in December at a discount to
similar quality Saudi's Arab Extra Light for the ninth month in a row,
data from Reuters and trade sources showed last week.
This was despite Saudi Arabia raising its prices to customers in Asia after sharp reductions in previous months.
had felt it had to reduce prices to ensure its crude remained
attractive to Asian refiners, a source familiar with their strategy
GOLDMAN LOWERS PRICE FORECAST
Sachs has lowered its average 2015 price forecast for benchmark Brent
and WTI futures to $50.40 and $47.15 per barrel, respectively.
The U.S. bank cut its three-month price forecast for Brent to $42 from $80 and U.S. crude
to $41, down from $70, adding it would need to stay near $40 for most of
the first half of 2015 before it would hold up shale oil investments.
keep all capital sidelined and curtail investment in shale until the
market has rebalanced, we believe prices need to stay lower for longer,"
its analysts said in a report.
As well as targeting North American shale, oil ministers from OPEC, including the UAE, have called for exporters, such as Russia, to cut output to lift prices. Russia, in turn, wants OPEC and Saudi Arabia in particular to cut production first.
the past decade, UAE's Murban OSP has been on average 15 cents a barrel
higher than Saudi's Extra Light OSP, but the relationship between the
grades switched since April last year, the data showed. In September,
Murban was priced at the widest discount to Extra Light in over a decade
Dhabi grade, Upper Zakum, also flipped into a discount against Saudi's
Arab Medium in December, even though Upper Zakum has been priced at an
average premium of $1.11 a barrel above the Saudi grade in the last
ADNOC sets its prices two months behind those of Saudi, Kuwait and Iraq, which gives the UAE's main producer more time to react to market changes.
UAE, OPEC's fifth largest producer, has been expanding its output and
remains on track to boost production capacity to 3.5 million barrels per
day by 2017, up from about 2.8 million bpd, its oil minister said in
remarks published last week.
UAE's price cuts have spurred demand for Abu Dhabi grades in the spot
market, with Taiwanese refiner CPC Corp buying volumes of Murban crude
at the start of the year.
Bansal of consultancy FGE warned that to restore market balance output
cuts will have to come from OPEC and non-OPEC producers.
"If no one blinks, then prices will continue to drop."
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Last updated: 3 Sep 2017
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