Saudi Arabia escalates Russia fight by flooding markets with $25 oil
Other Gulf producers join the battle
Saudi Arabia is flooding markets with oil at prices as low as US$ 25 per barrel, specifically targeting big refiners of Russian oil in Europe and Asia, in an escalation of its fight with Moscow for market share, five trading sources said on Friday.
The sources, from oil majors and refiners which process crude in Europe, said Saudi state oil company Aramco told them it would supply all requested additional volumes in April.
Sources previously told Reuters Saudi Arabia is also seeking to replace Russian oil with Chinese and Indian buyers, although not all refiners received volumes they had asked for.
Tanker rates soared as Saudi Arabia provisionally chartered around 31 supertankers to take extra oil, including to the United States, where Russian oil is usually less in demand.
Oil prices have halved since the start of the year because demand has been hit by the coronavirus outbreak and after Russia and OPEC failed to reach a new deal on supply cuts.
Moscow refused to support new deeper cuts, saying the impact from the virus could be much worse than thought, and Riyadh retaliated by opening its taps and pledging to pump record volumes on to the market.
Russia has so far said it is not planning to come back to the negotiating table despite feeling the pressure from the extraordinary Saudi moves.
Energy Minister Alexander Novak said on Friday Russia saw no grounds so far for returning to discussions with its OPEC+ partners and can increase its oil production by a modest 200,000 barrels per day in April.
By contrast, Saudi Arabia has pledged to raise output by 2.6 million bpd in April, including from stocks. Fellow Gulf producers like the United Arab Emirates had to join the battle for market share and has announced production increases.
Saudi Arabia has made a deep cut to its official selling prices for oil. Arab Light and Arab Medium barrels were offered at selling price of $2528 per barrel on CIF Rotterdam basis, traders said.
On Friday, Abu Dhabi National Oil Company (ADNOC) also offered steep discounts for its Murban crude for April, announcing forward prices for the first time in its history. It previously set prices retroactively.
Russia’s main blend Urals has been offered slightly higher than $30 per barrel on CIF Rotterdam basis, according to Refinitiv Eikon data.
“We are happy with our allocation. The requests for April were confirmed. I look forward to May if prices remain that attractive,” a trader with a European oil company involved in the talks told Reuters.
European oil refiners including Total, BP, Eni and SOCAR have all had allocations for additional Saudi crude oil supplies in April confirmed, the sources said.
Saudi Aramco declined to comment. Total, BP, Eni and SOCAR did not immediately respond to Reuters requests for comment.
Brent crude prices were on track for their biggest weekly fall since the 2008 financial crisis on Friday as investors fretted over the impact of the virus on demand and the Russian-saudi price war.