West Asian oil exporters are locked in an increasingly fierce battle for the world’s fastest-growing markets in Asia, as producers worldwide ship more crude east to compensate for shrinking demand from the US and Europe.
The fight for the trillion-dollar Asian oil market has ended decades of comfortable dominance for West Asian producers, who faced so little competition that refiners in Asia complained of being charged a premium of a dollar or so per barrel above what buyers in Europe or the Americas paid.
The picture has changed as rising US shale supply has sapped demand in the world’s largest crude consumer for the imports it previously bought from Latin America and West Africa. In Europe, years of shaky economy and increasing fuel efficiency have shrunk Russia’s traditional market.
The competition will become even stronger if sanctions on Iran are lifted in coming months and the million barrels per day (bpd) in Iranian exports that have been choked off returns to the market. Under sanctions, Iran fuelled the competition by offered discounts, easy credit and free shipping to keep oil flowing. If sanctions are lifted, it may have to be even more aggressive to regain market share.
Amid these shifting market pressures, the Organisation of the Petroleum Exporting Countries meets on Wednesday in Vienna to consider adjusting its output target of 30 million bpd. With oil prices well above $100 a barrel, OPEC is likely to leave the target unchanged for now, say delegates.
Iran’s shrinking supply has facilitated Iraq’s expansion, providing Baghdad with ready-made markets. Iraqi output is rising as international energy companies repair the damage wrought on its industry during years of sanctions and war.
Oil sales are paying for Iraq’s reconstruction and, seeking to sell every barrel available, officials are playing hardball.
“We’ll do our best to market the maximum amount of oil. We don’t want to leave our available oil idle,” a senior Iraqi official said, declining to be identified.
Iraq will become China’s second-largest supplier in 2014 if it succeeds in exporting the volume of crude it has committed to supply. Chinese firms have signed up for 882,000 bpd of Iraqi crude