“Geopolitical tension created by Russia’s involvement in Syria makes cooperation with OPEC highly unlikely”, said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
If Dubai crude rises relative to Brent, then oil from Atlantic basin suppliers, especially Angola and Nigeria, becomes more competitive for Asian refiners.
Fatih Birol, head of the worldwide Energy Agency, said on Friday said that global oil investments this year are on track to drop by 20 percent, marking their biggest decline in history as a halving in oil prices has hit energy companies’ revenue. YTD exports to the United States have risen too, but are still under a few pressure.
Global oil prices dropped from $100 to $45 per barrel for Brent crude in the second half of 2014, due to global oversupply.
The discount for the Medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a $2 a barrel cut in February 2012, according to data.
Since Y 2007, this is the 2nd-highest Saudi exports in 1-H of the year to those countries. The peak was in 2012 when 4.6 million bpd was exported in the January-June period.
“That was like a watershed when the Saudis said ‘we can’t allow this to fall any lower, ‘” an OPEC watcher with access to Saudi oil policymakers said, declining to be identified. “Thus there are increasing signs that the low price level is driving USA oil production further down”, says Commerzbank.
Figures from the US Energy Information Administration (EIA) and the IEA point to Saudi exports to major consumers in Asia and Europe reaching multi-year highs in 1-H of Y 2015.
Saudi Arabia, however, is continuing with its investments in the oil and gas industry as well as solar energy, its oil minister said.
Saudi officials had started thinking about the market share strategy in late Y 2013.
The world’s largest exporter has ramped up production above 10 million barrels a day for the past few months. The group has exceeded this official target every month since May 2014. “The right thing is keep focused on demand and supply”. “Oil prices at current levels look ever less sustainable absent a collapse in the global economy”.
Those Key factors are moving in favorable directions for Riyadh. Oil prices have fallen more than 50% in the past year as world supplies outpace demand by around 2 million barrels on any given day. “That said, the process of re-balancing has begun”.
A good test of Riyadh’s ability to reclaim market share may come in Y 2016. “Next year they’ll likely see a levelling off in domestic demand from their new refineries, but potentially also a few extra competition from Iranian and Iraqi barrels”.
