The rivalry between Saudi Arabia and Iran is becoming increasingly evident in the oil pricing policies of the two large Middle Eastern producers. The two countries are currently reigniting the market share and pricing war ahead of the returning U.S. sanctions on Iranian oil.
Saudi Arabia, OPEC’s largest producer, has been boosting oil production to offset supply disruptions elsewhere, including the anticipated loss of Iranian oil supply after U.S. sanctions on Tehran return in early November. The Saudis are also cutting their prices to the prized Asian market to lure more customers as they increase supply.
Iran, OPEC’s third-largest producer, is trying to convince its oil customers to continue buying Iranian oil despite stringent U.S. efforts to curb Iranian production.
Iran has slashed its official selling prices (OSPs) for all grades to all markets for September, looking to monetize what could be its last oil sales to some markets in Asia before the U.S. sanctions kick in. Tehran cut the prices for its flagship oil grades to more than a decade lowcompared to similar varieties of the Saudi crude grades, according to data compiled by Bloomberg.
Last week, the National Iranian Oil Company (NIOC) slashed the OSP for the Iranian Light crude grade to Asia by US$0.80 to US$1.20 a barrel above the Dubai/Oman average, used for pricing oil to Asia. The September prices for Iranian Light to Asia are at a 14-year-low compared to the similar Saudi grade sold to the world’s fastest-growing oil market, Bloomberg has estimated.
Earlier this month, the Saudis also slashed the September prices to Asia for their flagship grade, Arab Light, by US$0.70 to US$1.20 a barrel premium over the Dubai/Oman average. The reduction was slightly deeper than expected and the second consecutive monthly cut in pricing. The Saudis cut the prices for all their grades to all markets except for the United States.
Now Iran is also slashing prices for all grades to all markets, with the prices for Iranian Light, Iranian Heavy, Forozan, and Soroush grades to Asia, Northwest Europe, and the Mediterranean all cut by between US$0.50 and US$1.45, depending on the market and grades.
