Saudi crude oil price hike is at odds with regaining market share: Russell
LAUNCESTON, Australia - OPEC+'s recent decision to fully unwind 2.2 million barrels per day of crude oil output cuts has largely been viewed as a sign the exporter group is pivoting from trying to bolster prices to rebuilding market share.
The recent decision, however, by the main producer in the group, Saudi Arabia, to raise its official selling prices (OSPs) to its main Asian customers for September-loading cargoes seems to be at odds with a strategy to reclaim market share.
Saudi Aramco, the kingdom's state-controlled oil producer, raised its OSP for its flagship Arab Light blend to Asia to a premium of $3.20 a barrel above the Oman/Dubai average.
This was an increase of $1 a barrel from August-loading cargoes and the second straight monthly increase announced by Aramco, the world's biggest crude exporter.
The increase did match expectations of refiners surveyed ahead of the announcement by Reuters, and reflects shifts in market pricing for both the margin yields on various refined products and the term structure.
This means the Saudi increase in the OSPs, which affects the prices from other Middle East producers such as Kuwait and Iraq, was not unusual or out of line with recent trends.
But it also shows that Aramco was making little effort to boost the appeal of its crude to Asia-based refiners, which buy about 80% of the kingdom's exports.
In effect, Saudi oil, and the crudes from other producers that follow Aramco's pricing, are now less attractive to importers than rival grades that are priced against global benchmarks, such as Brent and West Texas Intermediate.
It would therefore not be a surprise if refiners in price-sensitive importers, such as China and India, seek to minimise imports from the Saudis and maximise supply from other sources.
This is already being reflected in Saudi allocations to Chinese refiners, with 1.43 million bpd scheduled to be shipped in September, down from 1.65 million bpd in August, Reuters reported on August 11 citing several trade sources.
At the same time China is ramping up imports from some producers outside the OPEC+ grouping.
PIVOT FROM OPEC+
China's imports from Brazil are estimated by commodity analysts Kpler at 1.39 million bpd in August, a record high and up from 739,000 bpd in July.
China's arrivals from Angola, meanwhile, are estimated at 823,000 bpd in August, the most since October 2023 and almost double the 419,000 bpd in July.
Refiners in India are reported to have received full allocations for September cargoes from Aramco, but haven't asked for any additional crude.
Indian refiners are still working out whether they will be able to continue buying Russian crude after U.S. President Donald Trump threatened to double tariffs on imports from the South Asian nation unless it pulled back from buying Russian oil.
So far there is little evidence that Indian refiners have eased back on imports from Russia, with Kpler estimating August arrivals at 2.02 million bpd, up from 1.60 million bpd in July.
But the real impact is likely to be seen in September arrivals.
What is already apparent is that Indian refiners are turning to crude from the Americas for September, with Kpler estimating imports from the United States at 465,000 bpd, up from 264,000 bpd in August and the most since January 2023.
India's imports from Brazil are estimated at 106,000 bpd in September, after it took no crude from the South American exporter in June, July and August.
It seems clear that both China and India seek out lower-priced crude when the Middle East giants raise prices.
The Saudis and producers that follow their pricing must know this, therefore it seems likely that increasing market share isn't their current priority.
Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis of everything from swap rates to soybeans. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X.
The views expressed here are those of the author, a columnist for Reuters.
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