The Saudi Aramco company could lower the price of oil due to competition with Russia in the Asian direction, noted in conversation with ABF "Economics today» Head of the Center for Analysis of Strategy and Development Technologies of the Fuel and Energy Complex of the Russian State University of Oil and Gas named after. AND. M. Gubkin Vyacheslav Mishchenko.
Saudi Arabia's National Petroleum Company Lowers Supply Prices for Asia and Europe Markets for June, reported by Bloomberg.
Saudi Aramco handed out discounts, but not all
According to Bloomberg, Saudi Arabia's Royal Oil Company has cut the price of Arab Light for the Asian region by 10 cents. This is the first drop in selling prices for this variety since December. 2020 of the year. The decrease in the cost of other grades of the company's oil in this direction was from 10 to 30 cents.
The Saudi company has lowered prices for 50-30 cents and for oil supplies to the countries of northwestern Europe, but for buyers from the United States, the cost increased by 20 cents.
Bloomberg analysts linked price cut for Asian clients to outbreak of coronavirus pandemic in India, which reduced the demand for energy.
What are the reasons for the decline in oil prices Saudi Aramco
Despite the assumption of Bloomberg experts, the main market for Saudi oil is not India, and China, sure Vyacheslav Mishchenko.
“The epidemiological situation in China remains quite stable, economically, the country is doing well, - the expert explains. - China remains the main driver of oil demand in the world as a whole. Royal Saudi Aramco sets oil prices, usually, directive. The selling price also includes a market component., but in general, prices are being set at the state level ".
Here, other than market factors, there may be some geopolitical reason. This is not the first time Saudi Arabia, represented by Saudi Aramco, has clearly cut selling prices, detecting attempts to dump in order to expand or maintain market share in a certain direction.
This line of behavior may be one of the versions, which explains the price decline that occurred. So, Saudi Arabia would like to maintain its market niche, offering an attractive price. If we consider the Asian direction, then here it comes, rather, to increase competition.
“There are two major manufacturers competing in the Asian direction.: Saudi Arabia and Russia with the "Eastern Siberia - Pacific Ocean" export pipeline (ESPO). One ESPO line goes directly to China, the other - to the port of Kozmino, from where a wide geography of oil supplies by tanker shipments opens up. Light oil of premium level goes through ESPO, respectively, Saudi Arabia feels light pressure from Russia in China and other Asian markets ", - emphasized Vyacheslav Mishchenko.
Since the opening of the ESPO pipeline, Saudi Aramco periodically makes similar dumping price cuts. Besides, African and American grades also enter the Asian market, therefore, now competition is taking place precisely for market share.
Regarding price reductions for the European direction, Mishchenko argues, lockdowns in EU countries remain, and the situation is far from stabilizing to such an extent, so that the growth in demand from European partners can be predicted.
In this case, Saudi Arabia is fighting for the Asian direction., including in such ways, as price dumping, concluded the expert.