Kuwait has reduced the discount for its oil in Asia against a similar grade from top world exporter Saudi Arabia to the narrowest in 19 months, a sign that the No. 5 OPEC producer has grown more confident in retaining market share.
Kuwait started discounting its crude against Saudi Arabia from late 2013 and it hit the lowest in more than a decade in October last year in a tussle over customers. Since then, the gap between Kuwaiti crude and Saudi’s Arab Medium has narrowed, and Kuwait announced in February an export deal to supply 100,000 barrels per day (bpd) to Asia.
Kuwait raised the official April selling price for its Asia oil sales to $2.85 a barrel below the average of Oman/Dubai quotes, up 5 cents from the month before, a source with knowledge of the matter said on Friday.
This is equivalent to a 45 cents a barrel discount to Saudi’s Arab Medium in April, 20 cents narrower than October last year, trade data showed.
Kuwait’s crude price formula is loosely linked to that of Saudi Arabia’s Arab Medium grade.
Despite the narrowing discount, Kuwaiti crude is competitive against spot grades that have sold at stronger differentials to their respective benchmarks this year.
“I think they have good demand for their grade especially with high (spot) premiums for other grades,” a Singapore-based trader said.
Besides Kuwait, OPEC’s third largest producer Iran has also this month raised its Light crude price against that of Saudi Arabia.
Global oil prices, which touched their lowest in since late 2003 early this year, have also limited room for producers to compete through price cuts.
Kuwait has also changed the way it prices oil for Europe, in a rare tactical move aimed at making its crude more competitive as the battle for customers between OPEC and non-OPEC rivals intensifies in the region.
The country’s acting oil minister said on Tuesday that it will commit to a potential global oil production freeze if major oil producers, including Iran, agree to join the pact.
Kuwait currently produces 3 million bpd of oil and plans to raise its oil production capacity to 4 million bpd by 2020.
Source: ReutersPrevious Next