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Thursday, March 31, 2016

World's Biggest Oil Market Is Too Tied To Mideast To End Addiction -- March 31, 2016

Bloomberg is reporting:
Mideast:
  • producers have cut official selling prices; defend against other suppliers taking their markets
  • Saudi Arabia is selling Arab Light in Asia for 75 cents below benchmark Middle East prices (compare with $2.75 premium in early 2014)
  • Iran offering its oil at a deeper discount than Saudi Arabia for first time in a decade 
  • strategy working; but IEA has warned there is an increased possibility of oil-security surprises in the "not-too-distant" future
  • with non-OPEC supplies falling, Asian refiners have no choice but to buy Middle Eastern oil: cheaper and available in large volumes
Asia likes Mideast oil:
  • shorter shipping times
  • attractive prices
  • type of crude oil the refineries were optimized for
South Korea:
  • imports from the Middle East climbed last year to the highest level since at least 1980
  • wants to diversity purchases to guard against geopolitical risks tied to some of the world's biggest suppliers 
  • imported 845 million bbls in 2015; high since 1980 when that country started compiling the data
India:
  • refiners are shunning shipments from distant ports, taking more cargoes from Persian Gulf
  • wants to diversity purchases to guard against geopolitical risks tied to some of the world's biggest suppliers
  • but, India's Reliance Industries, owner of the worlds biggest refining complex is shifting from crudes tied to Brent to grades priced against Dubai, the Middle East marker
China:
  • Saudi Arabia and Oman have boosted supplies to China this year as volumes from Venezuela and Colombia have shrunk
  • more than half of the top 10 suppliers were from the Middle East last year

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