Iraq, Kuwait and Iran decided to cut prices to Asian markets, following a similar move by OPEC’s largest producer
Other OPEC producers have decided to follow in the footsteps of the organization’s largest producer and cut prices to Asian markets. Iraq, Kuwait and Iran have all announced that they will be selling their oil at increased discounts to Middle Eastern benchmarks in order to protect market share in Asia.
Last week, Saudi Aramco said that the company would be selling its oil at a discount in Asian markets. The company sent out an email informing customers that it would be lowering the price of Arab Light in Asian markets by $0.90 per barrel to $2.30 less than Middle East benchmarks, the lowest it had sold Arab Light in at least 14 years.
Iraq’s Basrah Light crude will sell at $4.10 a barrel below Middle East benchmarks, the deepest discount since at least August 2003, the Oil Marketing Co. told Bloomberg. National Iranian Oil Co. said that its selling price for March Light crude will be discounted $2.10 a barrel, the widest discount since at least March 2000. Kuwait Petroleum Corp. said that its discount to Asian markets will be $4.10, the biggest since August 2008.
Keeping their foot in the door
“This is an effort by some producers to protect market share,” Sarah Emerson, managing principal of ESAI Energy Inc., a consulting company, said. “It’s straightforward; cutting prices is how you keep your foot in the door.”
Middle Eastern producers are increasingly competing with producers from Latin America, Africa and Russia for buyers in Asia. OPEC producers are now discounting prices in Asia in order to keep market share in the fastest growing energy market in the world.
“This is a global market that’s oversupplied,” Emerson said. “Late March and early April are in normal times a period of weak demand, so you have to be rather aggressive now if you want to sell your oil.”
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