Saudi Arabia Floods Market with Cheap Oil to Squeeze Out Russia
Cooperation between Moscow and Riyadh dramatically collapsed last week after Russia refused to support deeper oil output cuts desired by Saudi Arabia to fight falling oil demand as a result of the spread of the coronavirus outbreak.
Market sources told Reuters that state-controlled Saudi Aramco is trying to replace Urals in refiners’ feedstock around the world, from Europe to India.
“They (the Saudis) knock on all doors offering a lot and cheaply…” a source with a Western oil major told Reuters.
Saudi’s national shipping firm, Bahri, provisionally chartered up to 19 supertankers this week, with six of them set to take about 12 million barrels of Saudi crude to the United States, according to data and sources.
Saudi Aramco is in talks with European refiners, including big buyers of Urals oil like Finland’s Neste Oil, Sweden’s Preem, France’s Total, BP, Azerbaijan’s SOCAR, Italy’s Eni, the sources said.
The tactic has already started to pay off, with refiners ordering extra volumes of its crude for loading in April at “very attractive prices,” the sources added.
Saudi Aramco, Neste Oil, Total, BP, Preem, Eni and SOCAR did not immediately respond to requests for comment.
Saudi Arabia will open the taps beginning on April 1, releasing 12 million barrels of oil per day (bpd) into the markets. Russia’s maximum production capacity is 11.80 million bpd, with Asia and Europe being key export markets.
Russian Energy Minister Alexander Novak said on Wednesday that Saudi plans to raise output was “not the best option.” Novak is meeting Russian oil companies on Thursday in Moscow.
“Riyadh is really mad at Moscow for their move in (the) OPEC meeting, so they target (the) Urals markets first,” a source at a European trading firm involved in Urals trading said.
Market sources said that Saudi Aramco is trying to replace Urals in refiners’ feedstock in an attempt to punish Moscow and get the Russians back to the negotiation table.
On Saturday, the day after the landmark deal between the group known as OPEC+ fell apart, Riyadh slashed prices for its crude to customers worldwide.
Saudi Aramco may send an extra 1.5 million bpd to Europe in April alone, said the third source, who does calculations for a global trading house, said.
‘WONDERFUL PRICES’
Oil wars between Russia and Saudi Arabia are not new: both were at a standoff before the OPEC+ deal three years ago. But now Riyadh is ready to go to as far as Belarus.
Russia and its ex-soviet neighbor failed to reach a new oil supply deal in January, meaning that Minsk started to look for Urals replacement.
“We’ve been working with Saudi Arabia since last year, there was a meeting in London last week… The prices are just wonderful,” a source at a Belarus oil trader told Reuters.
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