Saudi Arabia Oil Monopoly: Could Russia and Iran End it?

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Russia’s strategy in the Middle East and Iran‘s re-entry in the oil market could end Saudi Arabia’s monopoly in Asia, according to suggestions of some experts in the oil industry.

Saudi Arabia dominates the oil market in Asia. Data from the U.S. Energy Information Administration (EIA) showed that the Kingdom maintained its market share among Asian oil importers during the first half of 2015.

According to the EIA, Saudi Arabia exported crude oil at an average of 4.4 million barrels per day (b/d) to its seven major trading partners in Asia from January to June this year. Asia represents more than 50% of the total crude exports of the Kingdom during the period.

The average total crude oil imports reported for seven Asian countries including China, India, Japan, South Korea, Singapore, Taiwan, and Thailand was 19.1million b/d. Saudi Arabia’s share of crude oil imports to the seven Asian countries was 23.2%

Russia surpasses Saudi Arabia as major supplier for China

Russia became a major crude supplier to China, the world’s second-largest oil consumers. In May, Russia supplied 3.92 million metric tons of oil to China, surpassing Saudi Arabia, which sold 3.05 million metric tons of oil.

Gao Jian, an analyst at SCI International previously commented that “Russia is using its good relationship with China to increase its supplies. Meanwhile, Saudi Arabia is losing its crown” because its selling prices in Asia haven’t been attractive enough. ”

The analysts added China’s oil import from Russia is expected to increase further since it can now use its renminbi as payment. According to him, Saudi Arabia needs to follow Russia’s decision to accept renminbi, not just dollar as payment for oil if it wants to regain its dominant position.

Saudi Arabia

Russia aims to split OPEC: Saudi Arabia’s soft spot

Saudi Arabia’s monopoly in Asia could be affected by competition from other crude oil exporting countries such as Russia and Iran, according to EIA. The agency noted that Russia increased its crude oil exports to China and Japan.

Experts in the oil industry suggested that Russian President Vladimir Putin appeared to be plotting to bring down OPEC (Organization of Petroleum Exporting Countries) based on his recent actions in the Middle East. Saudi Arabia is the biggest OPEC producer and the largest exported of crude oil worldwide.

Russia recently reached agreements with Iran, Irag, and Syria on intelligence and security cooperation. The country is currently providing military support for Syrian President Bashar-al Assad in its fight against anti-regime rebels and terrorists.

Saudi Arabia understands that Putin is looking for opportunities to hinder its interests, and the best way is to target OPEC, its soft spot.
The Kindom is concerned that Russian could partner with Iran and Iraq to reduce its market share in China and India. During the first six months of this year, Saudi Arabia’s share of crude oil imports to China was 16% and 20% in India.

Russia is also strengthening its relationship with Venezuela. Putin has been supporting Venezuelan President Nicolás Maduro’s calls for an emergency OPEC meeting about prices and efforts to encourage Saudi Arabia to change its policy. Putin said Russian, and Venezuela could work together to increase oil prices.

Dalan McEndree of wrote, “Indeed, Russia can be seen as maneuvering to split OPEC into two blocs, with Russia, although not a member, persuading the ‘Russian bloc’ to isolate Saudi Arabia and the Gulf Arab OPEC members within OPEC.”

Saudi Arabia is concerned about Iran’s re-entry into the oil market

Iran is also a major competitor of Saudi Arabia in the Asian oil market. Since reaching a nuclear deal with the West, Iran will now be able to re-enter the oil market.

Tehran is optimistic that it will regain its traditional oil buyers after the nuclear deal. It is recently announced the details of its four-phase program to attract Asian buyers. One of its plans to sell 50 to 60 million barrels off oil tankers anchored close to the ports of major Asian countries at a lower price. It is also offering extended credit and free oil deliveries.

Saudi Arabia is concerned with Iran’s re-entry because it could follow Russia’s moves to end its oil monopoly.

Iran’s Deputy Oil Minister for International Affairs and Trade, Amir Hossein recently stated that Tehran and Moscow will discuss energy cooperation and the recent developments in the global crude oil market. Russian Energy Minister Alexander Novak is visiting Iran.

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