OPEC split on oil pric­ing for Asia

Mem­bers on low- level alert af­ter Iraq switch

Global Times - - Biz Markets -

Gulf OPEC mem­bers Saudi Ara­bia and Kuwait are un­likely to fol­low Iraq in a shift in the way it prices its oil in Asia and will mon­i­tor Baghdad’s at­tempts to squeeze more dol­lars from its re­form, in­dus­try sources said.

Last week, Iraq’s state- oil firm SOMO be­gan con­sul­ta­tions with traders on its plans to switch to the Dubai Mer­can­tile Ex­change ( DME) for its Asian oil pric­ing from Platts’ quotes, which Baghdad and neigh­bor­ing Mid­dle East­ern pro­duc­ers Saudi Ara­bia, Kuwait and Iran have used for decades.

The switch by OPEC’s sec­ond­largest pro­ducer, aimed at boost­ing rev­enues from oil ex­ports at a time of low prices, fol­lows years of talks with the DME, which has also held con­sul- tations with Saudi oil gi­ant Aramco, ac­cord­ing to Gulf in­dus­try sources.

But Aramco is un­likely to switch from Platts any time soon.

“DME needs to show it’s a re­li­able price dis­cov­ery ex­change,” one in­dus­try source said. A sec­ond source said Aramco’s move to the DME was not on the cards for now.

Iraq’s move is pend­ing con­sul­ta­tions with its cus­tomers, in­dus­try sources said. It has asked cus­tomers for feed­back on the plan by Thurs­day, and some re­fin­ers may push back against the pro­posal, the sources said.

If suc­cess­ful, the switch will take place in Jan­uary 2018.

Platts, which dom­i­nates pric­ing of phys­i­cal oil, is not ex­pected to sit idle.

“Our pric­ing is well un­der­stood and widely ac­cepted. We are con­fi­dent that we can fend off com­pe­ti­tion,” said a Platts source who did not want to be named.

Traders who sup­port the shift to DME – a joint- ven­ture be­tween the CME Group and the gov­ern­ments of Oman and Dubai – say it is eas­ier to reg­is­ter and trade on the ex­change than Platts which has stricter cri­te­ria.

In­dus­try sources said Gulf OPEC mem­ber Kuwait was un­likely to change its Asian pric­ing be­fore Riyadh makes any move.

Mid­dle East oil pro­duc­ers have for decades ref­er­enced Saudi Ara­bia’s of­fi­cial crude prices when set­ting their own monthly crude sell­ing prices.

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