Iraq Says Asia Crude Discounts Offer No Basis for Oil Price War
Iraq said its decision to deepen the discount for January sales of its main crude to Asia provides no support for claims that producers are waging a price war.
Pricing for next months shipments of the Basrah Light grade to Asia is based on the market structure for both oil products and crude oil, Iraqs Oil Marketing Co. said yesterday in an e-mailed statement. The widened contango in crude oil prices in Asia was the major reason behind the cut.
Middle Eastern crude producers are competing with counterparts in Latin America, North Africa and Russia for buyers in Asia. Theyve lowered price differentials and maintained output, feeding speculation that theyre seeking to defend market share.
Saudi Arabia, the worlds biggest oil producer, lowered its official selling prices to Asia and the U.S. on Dec. 4 after the Organization of Petroleum Exporting Countries agreed last month to maintain its output target at 30 million barrels a day. Crude is trading in a bear market as the highest U.S. production in three decades exacerbates a global glut.
Its semantics, Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix GmbH, said yesterday by phone. You want to be competitive. The first one to price is Saudi Arabia, and for a while now, Iraqs been making sure it prices very competitively to them.
Brent slid 30 cents, or 0.5 percent, to $63.38 a barrel on the London-based ICE Futures Europe exchange at 12:09 p.m. Singapore time. West Texas Intermediate fell 75 cents to $59.20.
Iraq, OPECs second-largest producer, widened the discount for Basrah Light to $4 a barrel compared with the regional benchmark, the Oil Ministrys marketing arm known as SOMO said Dec. 8. The country produced 3 million barrels of oil a day last month and exported 2.51 million barrels daily, SOMO said yesterday in a separate e-mail.
The cut in price levels by $1.50 a barrel from December followed Saudi Arabias reduction in its January differentials to Asia. Basrah Light to Asia has sold at a discount to Saudi Arab Medium crude since November 2012, according to data compiled by Bloomberg.
Members of OPEC, which supplies 40 percent of the worlds oil, are waging an internal price war to preserve their share of an oversupplied market, Iraqi Oil Minister Adel Abdul Mahdi said Oct. 30.
There is a price war within OPEC, Abdul Mahdi said in Baghdad at a parliamentary session broadcast on state-run television. The markets fundamentals have changed, with an extra 3 million barrels a day of crude entering the market at a time when growth in China and India has slowed.
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Iraq Says Asia Crude Discounts Offer No Basis for Oil Price War