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Saudis Bring Oil War To Europe With Largest Price Discount Since 2009
With oil exports to Europe having slipped from 13% of Saudi's total to just 10% in the last six months, The FT reports, the de facto leader of OPEC has slashed its Official Selling Price (OSP) to Europe in an effort to regain market share. Saudi lowered its OSP for its Arab light crude grade in Europe by $1.30 a barrel for December, taking its discount to the weighted average of the North Sea Brent benchmark to $4.75 a barrel - the largest discount since February 2009.
The move, as we detailed previously, is basically going after Russia's customer base, has raised heckles in Moscow, with Rosneft CEO Igor Sechin complaining last month about Saudi "dumping" after he revealed the kingdom was selling oil to refineries in Poland.
Chart: Bloomberg
As The FT reports, the de facto leader of Opec, which produces more than one in every ten barrels of oil in the world, has been squeezed in Europe over the past year as rival producers have sent more oil to the region.
Rising shipments from Iraqi Kurdistan that are delivered into the Mediterranean via the Turkish port of Ceyhan have displaced some Saudi shipments this year, traders and analysts said, while more crude from west Africa is also flowing to Europe.
Saudi Arabia has responded by trying to find new customers, including targeting refineries that have traditionally taken the majority of their supplies from Russia and the North Sea.
The global oil market remains oversupplied by at least 1m barrels a day, a move exacerbated by both Saudi Arabia and Iraq raising production since Opec decided last year to focus on squeezing out higher cost producers rather than defending price.
“If Saudi Arabia and Iraq went back to producing what they were before last November’s Opec meeting, the market would now be in a deficit,” said Paul Horsnell, head of commodities research at Standard Chartered: “The policy can’t be characterised solely as a market share battle. Anything coming into the Mediterranean competes first with Russian and Iraqi crude.”
Russia’s oil output has also risen to post-Soviet era highs in 2015, despite crude prices more than halving to less than $50 a barrel since summer 2014. Russia is also sending more crude into Asia via its Eastern Siberia Pacific Ocean pipeline, increasing competition in those markets.
“ESPO has taken a fair share of Saudi’s market share as well,” one trader said.
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Don't the Europeans still have to pay the Saudis in US Dollars?
Because those USD are getting expensive relative to Euros.
Doesn't Russia allow them to pay in Euros?
Is this akin to QE, a prop up for BAU in a weakened business model?
OT but text of TPP just released;
http://www.mfat.govt.nz/Treaties-and-International-Law/01-Treaties-for-w...
"Thanks, I think I'll read it later but first I have to go vote on it" signed Nasty Pelosi
I think it's a sign of desparation in a kingdom going broke.
Who can keep their economy from going bust first? I know Russia is on the ropes but does the KSA export anthing but hydrocarbons?
When I see "Pre-owned camels -- for sale" on FleaBay then I'll know their trouble is serious.
I stand corrected. That is a helluva list.
The entire global fungible oil market is denominated in US dollars.
This is why when you here this or that country mouthing off about trading oil in their own currencies people laugh. For example. THe Iranian Rial or the Russian Ruble would have to have global acceptance in the trade AND have the value to make the trade worth it. Ain't happening. Finance centers around the world chuckle when these geniuses strut around yapping about their shit plans to create their own oilo markets...
Wrong. Russia, the current largest producer accepts oil trdes in Rubles for its oil.
From who?
Which real country pays for oil in Rubles. You do understand that would mean this market participant would need to buy Rubles at the exchange rate of the US Dollar to complete the transaction right?
Quit yer bitchin'....For now, that should favor the crude buyer.
Belarus pays for oil in Rubles.
Then they convert the value of their Rubles into a US dollar amount.
Oil is globally priced in the US Dollar. Look at the chart at the top of this article, do you see the word "Ruble" on that chart anywhere?
Are you suggesting that because some country buys oil in Rubles, they don't pay the US dollar equivalant for that same berrel of oil?
Seriusoly, where you people get your economic information from is beyond ridiculous -- it's scary...
I'm sure China is buying in RMB. Same as they're doing with Brazil. This is a huge development and will take some time to establish but really, the days of the Petro Dollar are numbered.
China can buy all the oil it wants in RMB. They will currency convert their RMB to the dollar denominated price.
This is the point. You can buy oil with anything you want -- unicorn farts or whatever. It doesn't matter because you need to currency convert that to the global established pricing mechanism which uses the US Dollar.
The fact that people can't grasp this obvious fact on how the global fungible oil markets work is simply astonishing...
...the difference, of course, being that the USA is the only nation that can create those US Dollars out of thin-fucking-air.
Bretton Woods + Nixon Ending Gold Standard + Gulf Wars = Petrol Dollar FTMFW.
Yup everything is traded in dollar and thats why gradually Dollar usage worldwide in overall Trade is reducing and China's Yuan from nowhere broke into top 3 currency usage from nowhere in merely 7 years. Ofocurse it's a gradual process so ignorants like you can brag as much you want but your government perhaps doesn't. You clearly negated East's and China's financial institutions and even CIPS etc. Things will take time to cross the level of US made institutions in post world war II era.
The issue is not what currency is used to make payment (they are all exchangeable). The issue is which currency is the agreed price specified in. Outside of trades within the BRICS countries (including associate members) world pricing of oil is specified in US dollars. For example China-Russia oil trade is not priced or paid in US dollars but in Yuan.
Russian oil supplied to Europe (eg Poland) is priced in US dollars. Russian pipeline gas supplied to Europe is indeed priced in Euros however, with a very small number of exceptions.
The issue is which currency you pay in. The price of oil in Dollars can fluctuate, but if you pay the equivalent for oil in ...Rubles or Yuan, where is the demand for Dollars? That is where the petro Dollar derives its strength. U.S. Treasuries Are Dollar equivalents. Treasuries and Dollars,are as good as oil. Once you can pay in other currencies demand for the Dollar decreases. Why hold a bond with almost no interest, that devalues consistently, when you can pay in your own currency? You look for other reserve assets that actually hold value such as Gold.
Who wants a Ruble. The Russian People horde US Dollars.
@Horseman...you nailed it.
If this keeps going you'll get e free barrel of oil with every pizza delivery by Domino's.
Can you imagine how happy the Brits and Norwegians must be, with falling oil revenues and rising Muzzie invasion?
At this rate, even the Queen and Englishment will wear Islamic robes. I think the men already do, judging by their behavior (passive, cross-dressers). No wonder the British chicks would rather have Muzzie dick. All real Englishmen are dead or have left the country. Ditto for most of EU.
Aloha snackbar!
Desperation move by turban thugs. Attempt in bribing EU because Uncle Sam standing behind them ready to sink knife in back.
http://syrianperspective.com/2015/11/saudi-arabia-behind-russian-airline...
In the 60's I remember big signs in front of competing gas stations saying GAS WAR. It often went down to 19cents a gal. Also, If Russia proves that the Saudis downed their plane we might see that glass desert we hear about.
"If Russia proves that the Saudis downed their plane"
Russia has other things to worry about -- like proving they didn't blow up their own aircraft as a false flag.
The Russian aircraft tragedy happened and the very next day Putins ratings in Russia hit an all time high. The very next day. Coincidence?
Ukraine is a shit show with a lot of questions being asked at home. Syria is costing $5 MILLION PER DAY. Russians at home are losing social services due to lack of funding. The Russian economy is in the toilet. The aircraft tragedy happens and then Putin reaches all high time ratings the -- very -- next -- day... Coincidence?
In the asylum the internet held? The request of the chief physician of the psychiatric hospital and nurses: remove the patient from the computer.
5 Million$ per day ? Hhahahaha watchout we got a new troll here. Get your facts straight before spouting your clueless diatirbe.
So more "OIL and circuses"...
interesting.
Quick sell those Europeans some F150 pick-ups!!!
And white Nikes!
Lest they wear white Addidas sneakers.
Kirk likes to wear a DUS-T, rather than a mock-turtleneck. I like to be more prepared than look like a Jobs-wannabee.
WHAT WILL POOTY DO!!!!!
Lol...
Toast.
I think this guy instead to understand even more confused.
Feels like some kind of truth, but afraid to believe it and because porridge in the head even more. A severe case.
In the madhouse boots...
I'm going to sine your pitty on the runny kine!
Everything must go! Crazy Abdul's prices are INSANE!!!
It is Obama's war against Russia's largest export and Putin.
And American poodle Saudi Arabia goes along
Stakes are high as US plays the oil card against Iran and Russia
John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.
http://www.theguardian.com/business/economics-blog/2014/nov/09/us-iran-r...
Yea and Pooty "the chess player" gets hit with a checkmate...
The entire Russian economy is funded by oil and they can't survive at these prices. They are already spending seperate reserve accounts and halting social services -- whilst Putin spends ~$5 MILLION PER DAY in Syria. The Russian people are not gonna be kind in short order. Pitchforks. Everywhere pitchforks. Watch and see...
You're a fool and this is clearly the diagnosis.
BB, no offense - but why keep feeding this particular troll? Hard to resist, I surely know, but his game is disinfo and distract.
and that's all it is.
Hey Einstein, this is all FACT. Now, I can understand how a thing called a FACT can throw you off, but others see them for what they really are and that is a FACT. "Disinfo and distract" Lol...
The entire Russian economy is funded by oil and they can't survive at these prices. They are already spending seperate reserve accounts and halting social services -- whilst Putin spends ~$5 MILLION PER DAY in Syria.
LMFAO!!!
..and how much did the U.S.S.A. spend/spending on Iraq, Afghanestan, Lybia...
Remind us, what is the DEBT in the U.S.S.A. again?
Might want to check into those FACTS too...
5 million does not even register compared to what the U.S.S.A. spent and continues to spend, despite havng much more government debt than Russia.
What a maroon.
I've been 'watching', just as the likes of your sort have suggested for the better part of ~2 years now. The credibility of your argument with regard to Russia and its leader holds abouts as much weight as the Federal Reserve's does regarding interest rate hikes.
There comes a time in all Poker Games (even in Texas Hold 'em), where you either Fold or Call.
Russia better Call before the bet is too large.
An attempt to swing public support for a pipeline between Saudi to Europe so Crazy Abdul's low, low, prices can continue forever??!
Again, it all comes down to oil as Putin knows that controlling the flow from the Middle East (via his involvement in Syria and ultimate desire to control this source of oil in the entire region) will give him game, set, and match. With the two biggest consumers being Europe and Asia (really China and India) and the two biggest suppliers (including gas) being the Middle East and Russia, control of the markets and customers is of critical importance.
If one party (i.e., Russia) is allowed to control the production and distribution of oil to what is essentially 50+% of the global economy, the balance of power will forever change, a fact that the US is keenly aware of and deeply concerned about. Thus, back to the battle for the Middle East. Allow Russia to control this region, albeit slowly as Syria is just the first step along with forming alliances with Iran and Iraq, and basically isolate the Saudi's from global markets, the global energy market will basically be controlled by Putin as well as pricing mechanisms (including displacing the USD as the primary currency to settle oil trades).
As all ZH readers know, the battle in the Middle East has been, is, and will always be about oil. Hell even ISIS understands this as oil is one of the primary resources used to fund their war efforts. I have to give it to Putin as this was very well played. Allow the US to stumble around and create a situation that is FUBAR in the Middle East for the better part of 25 years (think back to the first Iraq operation) and then when the US and its allies are at their weakest point, attack. Build a coalition with the only quasi powers in the region including Iran and then watch as Saudi Arabia scrambles to figure out what to do next (and looks to lean on the US for help). And what do you get, a desparate attempt to find some buyer for its only product - Oil. Remember, pricing is one thing, distribution and control of customers is something completely different.
It would appear that the Saudi's are dissolving into the abyss as with the recent change in rulers (I believe their King died last year), currently being surronded on all fronts by hostile forces, a plunging price for their only product, waning global support, and draining foreign reserves, it would appear that the Middle East is about to transition into a new era controlled by the East and not the West. No doubt that this will be an interesting and very bumpy ride as the world geo-political climate continues to rebalance.
So you're saying Putin will control the production and oil flow out of the ME?
Cough cough sure. Yea the world will just give him open arms to do that. The entire world. ALL the countries of the world will welcome Putins take over of the Middle East...
Right. Sure. OK.
I read an article in ZH a long, long time ago where you predicted this decline in the oil markets. Wish I could recall the article's name. Just to compare...
Saudis desperate for market share.
Mama needs some new Stingers.
The House of Sand is a cruise missile and weapons drop or two away from being overthrown by their own people. And no one will shed a tear.
Meanwhile, I stand in profound amazement at the American government's inability to track down the source of "ISIS'" funds. Imagine - they can pull oil out of the ground, and ship it overland in convoys, and sell it, and the US has been helpless, absolutely helpless I tell you, to stop Turkey and Israel buying oil from ISIS via Kurdish middlemen.
on the other hand, the US sure knows where the Syrian electrical grid is.
And yet, interestingly and paradoxically enough, Russia is unable to defend this obvious and key target. Go figure.
CL just got its feet knocked out from beneath it... After a week of driving stocks higher, now leading them lower.
http://pebblewriter.com/cl-algo-madness/
Russia and China: The Dawning of a New Monetary System?
Very nice. But "Show me the money!"
I.e. show me the new BRICS money, and the actual and broad-based usage of CIPS, rather than SWIFT. Until this happens, it's all one big Show.
Perhaps Russia is 'showing' China how their MIC works, to calm their concerns? Be that as it may, those concerns won't be laid to rest until there is a direct Russia-US dogfight over Syria, or an F-16 or two gets shot down. Only when Russia can lock down Syrian airspace from any and all US flights, will the Chinese respect them enough to fully back them, and go "balls out" with CIPS.
Saudi monarchy is tired of living in this cruel world.
Guys,
This is what Georgia was really about.
This is what Ukraine is about.
This is what Syria is about.
This is what Iraq is all about.
This is what the Arab Spring was all about.
This is what most every conflict in Eurasia has been about for the last 20 years... Who gets to sell energy to the emerging "Unified Europe".
There are similar conflicts brewing on the oceans in Asia proper over who fuels China.
Forget what you see in the MSM.
Forget what you see on RT.
You cannot trust a party to the conflict to report accurately when doing so is against their interests.
Energy is the living blood of the modern world.
And those who supply it can turn off the modern world at will.
That, people, is raw power.
And that is what this is all about.
Control the oil & gas reserves and their routes to market -- via terrestrial or marine pipelines, and via shipping lanes and you control the planet.
The downed airliner in Sinai can't be a coincidence.
The Suez Canal is nearby, and what better excuse to justify a presence in the region than ISIS shooting down an airliner. If Russia controlled the Suez Canal at the mouth of the mediterranean, it would stop Saudi oil tankers from reaching the European market and eroding their market share.
The only other shipping route is all the way around Africa, and it is not feasible.
Saudis act at behest of their puppetmaster the Satan America. They want to destroy Russian oil & gas trade so that America can create Ukraine like uprising & govt change in Russia , break up Russia like an egg and make omlette(money) by leasing all Russian oil & gas assets to American corporations (& sons of American MPs would rule)