Russia boosts oil sales in Asia, even as OPEC battles to win customers
18 Dec 2015 - {{hitsCtrl.values.hits}}
REUTERS: Russian oil producers have strengthened their position in Asia by supplying nearly a quarter more crude this year, shifting the balance of power in one of the few bright spots in the global market and blunting OPEC’s high-profile drive to win customers.
Aided by a weak rouble and new pipelines, Russia has replaced Iran as a top five supplier to Asia, boosting sales 23 percent to 1.3 million barrels per day in the first 11 months of 2015 from a year ago, according to data compiled by Reuters based on trade flows and customs information.
Russia’s share of the world’s biggest oil market has risen to 7.3 percent from 4.7 percent five years ago and shows how President Vladimir Putin’s efforts to court Asian countries such as China is bearing fruit as it looks to cut its dependence on its traditional markets such as Europe.
China and South Korea saw the biggest jumps in Russian imports, according to the data. Given Russia’s proximity to major crude buyers in North Asia, it can export crude on tankers via Sakhalin Island, and by pipelines directly to China or via the Russian port of Kozmino on the Sea of Japan.
Another advantage for Russia has been the more than halving in the value of the rouble against the U.S. currency since mid-2014, slashing production costs in dollar-traded international oil markets.
“Given Asia is the main crude short (undersupplied area) left in this market, the battle for market share remains intense,” said Amrita Sen, chief oil analyst at consultancy Energy Aspects.
Within the Organization of the Petroleum Exporting Countries (OPEC), Iraq has been the firm winner, raising its supplies to Asia by a quarter thanks to record production and heavy discounts that illustrate how intense the price war for customers has become even within OPEC.
The expansion by Russia and Iraq in Asia this year has capped increases for Saudi Arabia, suggesting the strategy the OPEC kingpin is leading of pumping more oil to expand market share has only worked within limits.
Led by Saudi Arabia, OPEC decided in November 2014 not to cut output to prop up prices but instead to keep producing in defence of market share against other producers like Russia or shale drillers in the United States.
“We don’t think this strategy can last much longer especially if you see how Russia expanded in Asia in 2015,” said Emril Jamil, senior analyst at Thomson Reuters Oil Research & Forecasts, in a reference to producers struggling to make a profit at low prices.
“OPEC did not make significant gains in market share in Asia in 2015,” he added.
While Saudi Arabia managed to halt a decline in its Asian market share last year and remains the region’s top supplier by raising exports by 2.7 percent in the first 11 months this year to 4.2 million bpd, OPEC data shows that its sales to Asia peaked at 4.59 million bpd in 2013.
Within OPEC, Iraq overtook Kuwait to become the third-largest crude supplier to Asia behind Saudi Arabia and the United Arab Emirates (UAE) this year.
The second-largest OPEC producer boosted its crude deliveries to major customers in Asia by close to 360,000 barrels per day (bpd) to 1.77 million bpd in the first 11 months, Reuters data showed.
Iraqi oil exports to India rose by a third to just over 600,000 bpd, nearly on par with top buyer China, as refineries such as Reliance Industries boosted purchases and as India created strategic stockpiles.
Top UAE producer Abu Dhabi’s exports fell 3.7 percent in the first 11 months on rising domestic demand, Reuters data showed, but trade sources said the Emirate may reclaim some of its share when it increase production in the second half of 2016.
“Asia is now spoilt for choice, so producers will have to continue to discount their crude to get in,” said Sen of Energy Aspects.
