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Dec. 9 (Bloomberg) Marketfield Asset Management CEO Michael Shaoul examines falling oil prices and the impact on global markets. He speaks with Bloombergs Tom Keene, Scarlet Fu and Brendan Greeley on Bloomberg Surveillance. (Source: Bloomberg)

Iraq will sell its Basrah Light crude next month to customers in Asia at the steepest discount in at least 11 years, following Saudi Arabias lead as Middle Eastern producers seek to defend market share.

Basrah Light, a high-sulfur oil used by refiners including China Petroleum & Chemical Corp., was set at $4 a barrel below the average of Middle East benchmark Oman and Dubai grades, according to a statement from Iraqs Oil Marketing Co. yesterday. Thats the lowest since at least August 2003, when Bloomberg started compiling the data. The official selling price to U.S. buyers was cut by 30 cents compared with December, while shipments to Europe were marked up by 10 cents.

Iraq is reducing export prices to Asia after a similar move by Saudi Arabia last week. The two nations are the biggest producers in the Organization of Petroleum Exporting Countries, which decided against cutting its production quota at a Nov. 27 meeting even as the highest U.S. output in three decades is seen exacerbating a global glut.

Saudi Arabian Oil Co. reduced its January price for Arab Light sales to Asia to $2 a barrel below the Oman-Dubai average, the Dhahran-based company said in an e-mailed statement on Dec. 4. Thats the widest discount since June 2000 when Bloomberg began compiling the data. Its Arab Medium grade, which National Iranian Oil Co. and Kuwait Petroleum Corp. have followed in the past, was cut by $1.85 from December.

The increase in discounts is seen as a move by Middle Eastern producers to defend market share, Erik Nikolai Stavseth and Kurt Waldeland, analysts at Arctic Securities ASA in Oslo, said today in an investor note. This should incentivize Asian buyers to increase stockpiling short term, supporting seaborne crude volumes out of the Middle Eastern Gulf. At the moment, owners are still enjoying firm freight rates.

VLCCs, or Very Large Crude Carriers, are commanding spot-market rates of about $64,000 a day, while Suezmaxes are being quoted at about $38,000 a day, the analysts said. We remain positive on the crude tanker segment moving into 2015 on the back of limited supply growth and continued increase in average distances sailed, they said.

Middle East producers form half of OPECs 12 members, which collectively supply about 40 percent of the worlds oil. Iraq ships Basrah Light from its oil terminal in the Persian Gulf and also exports Kirkuk crude to U.S. and European markets mainly via the Turkish Mediterranean port of Ceyhan.

To contact the reporters on this story: Sherry Su in London at lsu23@bloomberg.net; Sharon Cho in Singapore at ccho28@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net Bruce Stanley, Alaric Nightingale

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Iraq Follows Saudis Discounting Oil for Asia to 11-Year Low