Iran selling Forozan Blend to Asia at a $2.43 discount

Iran is increasing pressure on fellow OPEC members as its attempts to retake lost market share in major markets like Asia.

The Islamic Republic is now undercutting the price of Saudi crude oil in Asia after holding its own crude at a premium to Saudi Arabia’s light crude for almost seven years, according to data from Bloomberg.

State-run National Iran Oil Co. will sell the Forozan Blend crude for May to Asia below the price of Saudi Aramco’s Arab Medium crude. NIOC will also sell Iranian Light to Asian customers for $0.60 below Middle East benchmark prices, a company official told Bloomberg on the condition of anonymity.

The May Forozan price represents a $2.43 discount per barrel to the average of the Oman and Dubai benchmark grades, and $0.03 less than Saudi Aramco’s price for the similar Arab Medium variety. Forozan sold at a $0.07 premium to the Saudi oil in February.

While the key battle will be for market share in Asia, Iran and the rest of OPEC will compete for market share in a number of places said John Driscoll, chief strategist at JTD Energy Services. Driscoll sees “vigorous competition” between Iran and the rest of OPEC in regions such as the Mediterranean and Northwest Europe.

Cooperation with Iran the lynch-pin to production freeze

It is being increasingly speculated that the upcoming meeting among OPEC and non-OPEC producers to freeze production could be fruitless. Saudi Crown Prince Mohammed bin Salman said during an interview that the kingdom would freeze production on the condition that Iran did as well, something the Islamic Republic has repeatedly said it has no intentions of doing.

“Kiss goodbye to any Doha accord,” said Carsten Fristsch, an analyst at Commerzbank AG in Frankfurt. “There will be no agreement without Saudi Arabia. Why should others sign up to freeze output?”

Prices still climbing on inventory draws

A surprise inventory draw in the U.S. this week helped bolster prices despite the faltering freeze agreement. Much of the draw was related to lower imports caused by fog in the Houston Ship Channel, and may not be sustained next week. U.S. production is declining, according to reports from the EIA, however, which could further support prices.

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