OPEC Oil Prices

Iran joins OPEC producers to cut prices for crude

OPEC figures show drops in output and price of Iranian oil for January 2015.

OPEC figures show drops in output and price of Iranian oil for January 2015.

TEHRAN: Iran has joined OPEC (Organization of the Petroleum Exporting Countries) producers along with two countries Kuwait and Iraq, to cut their March crude prices, indicating the battle for a share of OPEC’s largest market is intensifying.

Iraq’s Basrah Light crude will sell at $4.10 a barrel below Middle East benchmarks, the deepest discount since at least August 2003, the Oil Marketing Co. said Tuesday. National Iranian Oil Co. said its official selling price for March Light crude sales will be a discount of $2.10 a barrel, the widest since at least March 2000, according to a company official who asked not to be identified because of corporate policy. Kuwait Petroleum Corp. said Wednesday its discount will be $4.10, the biggest since August 2008.

The cuts come after Saudi Arabia, the largest crude exporter, reduced pricing to Asia last week to the lowest in at least 14 years. The Organization of Petroleum Exporting Countries left its members’ output targets unchanged at a November meeting, choosing to compete for market share against US shale producers rather than support prices. Iraq is the second-biggest producer in OPEC, Kuwait is third and Iran fourth.

“This is an effort by some producers to protect market share,” Sarah Emerson, managing principal of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts, said by phone Tuesday. “It’s really straightforward; cutting prices is how you keep your foot in the door.”

Middle Eastern producers are increasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia. Oil prices have dropped about 45 percent in the past six months as production from the US and OPEC surged.

The International Energy Agency said Tuesday that the US will contribute most to global growth in oil supplies through 2020 as OPEC’s attempts to defend its market share will hurt other suppliers including Russia more.

“If they go out and sell at a higher price, they won’t sell much,” John Sfakianakis, Middle East director at Ashmore Group Plc, a London-based investment manager, said in an interview in Dubai Tuesday. “For the Saudis, it’s market share at any cost. Saudi (Arabia) is the leader in this and the others have to follow the leader.”

Iran’s output rose to 2.78 million barrels a day in January from 2.77 million a month earlier as Iraq boosted supply to 3.9 million from 3.7 million, according to a Bloomberg survey of oil companies, producers and analysts.

Saudi Arabia won’t balance global crude markets by itself even as prices fall “too low for everybody,” Khalid Al-Falih, the chief executive officer of Saudi Arabian Oil Co., said at a conference in Riyadh on Jan. 27. The Kingdom’s Oil Minister Ali Al-Naimi has said producers outside of the group should trim their output first.

By Customs Today