Saudi Arabia has targeted Russia's EU oil market share. The Saudi plan is to flood Europe with "Arab Light" crude oil at deeply discounted prices.
The Saudis, OPEC’s de facto leader and top producer, are aiming to grab market share from Russia in the oil price war it launched on Moscow to punish it for refusing to back deeper OPEC+ production cuts last week. And Europe is a key battleground in the new oil wars as Russia’s Urals crude has traditionally been a popular choice among European refiners.
Saudi Arabia hasn’t seen Europe as a core market in recent years because it has prioritized continuously growing demand in Asian markets. But in the war of market share, the Kingdom is now looking to squeeze Russian oil out of Europe by offering deep discounts which make its Arab Light crude priced at as low as $25 a barrel at Rotterdam, much lower than the price of Urals.
If prices of Urals and other crude grades going into Europe don’t drop to match the Saudi discounts, Saudi Arabia is set to “push out” the Urals grade from the refiners’ diet, Energy Aspects’ chief oil analyst Amrita Sen said in a note, as carried by Bloomberg.Russia, meanwhile, says production cuts are a non-starter, fearing one cut could lead to further spiraling cuts. However Russia is planning to counter Saudi Arabia's increased production by increasing its own.
Russia plans to boost its production by between 300,000 and 500,000 bpd from next month, which would bring the total to 11.8 million bpd. Meanwhile, Saudi Arabia said it will boost its production by more than 3 million barrels daily from current levels, to 12.3 million bpd, which is more than its production capacity. To be able to maintain this production rate, the state energy company Aramco has been told to boost its production capacity to 13 million bpd.