Oil War Comes To Europe

With oil exports to Europe having slipped from 13 percent of Saudi’s total to just 10 percent in the last six months, The FT reports, the de facto leader of OPEC has slashed its Official Selling Price (OSP) to Europe in an effort to regain market share. Saudi lowered its OSP for its Arab light crude grade in Europe by $1.30 a barrel for December, taking its discount to the weighted average of the North Sea Brent benchmark to $4.75 a barrel – the largest discount since February 2009.

The move, as we detailed previously, is basically going after Russia’s customer base, and has raised heckles in Moscow, with Rosneft CEO Igor Sechin complaining last month about Saudi “dumping” after he revealed the kingdom was selling oil to refineries in Poland.

As The FT reports, the de facto leader of OPEC, which produces more than one in every ten barrels of oil in the world, has been squeezed in Europe over the past year as rival producers have sent more oil to the region.

Rising shipments from Iraqi Kurdistan that are delivered into the Mediterranean via the Turkish port of Ceyhan have displaced some Saudi shipments this year, traders and analysts said, while more crude from west Africa is also flowing to Europe.

“If Saudi Arabia and Iraq went back to producing what they were before last November’s OPEC meeting, the market would now be in a deficit,” said Paul Horsnell, head of commodities research at Standard Chartered: “The policy can’t be characterised solely as a market share battle. Anything coming into the Mediterranean competes first with Russian and Iraqi crude.”

Full article: Oil War Comes To Europe (OilPrice)

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