Saudi Arabia resumed dumping in Asian market

Over the weekend Saudi Arabia lowered prices for September delivery of crude oil for customers in Asia range from $0.7 to us $1.3 per barrel, depending on the degree of purification, according to The Wall Street Journal. The publication notes that this step contributed to the fall in world oil prices below $42 per barrel.

On the assessment of the WSJ, discounts from Saudi Arabia was the biggest since October last year. In recent months, as noted by analysts from Reuters, the Kingdom refused to dumping, hoping to get revenues from price increases and not from increased market share.

In early may Saudi Arabia dramatically increased rates for Asia, which experts regarded as a sign of increasing demand.

The WSJ source familiar with the discussion about the price drop Saudi Arabia, said that the discounts were made to counter the competitors from the Middle East and Europe. According to the newspaper, we are talking about Iran, Iraq and Russia.

The Asian market accounts for more than half of the exports of Saudi oil, but the Kingdom continues to take positions there. In China, increasing its exports to Russia, oriented on the supply to independent refineries. According to China customs, the volume of Russian exports increased in annual terms by June of this year by 9% to 4 million tonnes, with Saudi deliveries for the same period decreased by 14% to 4.6 million According to the estimation of OPEC, Russia increased in the second quarter production of oil and gas condensate production by 150 thousand Barr./day compared to last year, reaching the level of 11.03 million barrels./day

In the Indian market, according to local Ministry of petroleum, Saudi Arabia has avoided Iraq, which was sold in the second quarter of 11 million tonnes, 1 million tonnes more than Saudi Arabia. A year ago the picture was opposite, and Saudi delivered over Iraqi 900 thousand tons.

Research fellow, Center on global energy policy at Columbia University Jamie Webster said that part of the weakening of the Saudi position in Asia caused by the actions of Iran, which since the lifting of sanctions in January uvelichi production by 600 thousand Barr./day.

According to consultancy JBC from Vienna, total exports of Iran to China, Japan, South Korea and India were in the first half of 2016 an average of 1.4 million bbl./day, which is 29% above last year’s level.

The WSJ notes that Saudi discounts caused not only by considerations of competitiveness — they also aimed at stimulating demand in a slowing Chinese market, told the publication source. OPEC expects oil consumption in China will increase this year on 280 thousand Barr./day, whereas a year ago it increased by 350 thousand Barr./day.