A market share battle between Russia and OPEC oil producers in Europe is intensifying, as Iraq has overtaken Saudi Arabia as the second largest seller there.
Russia has gained market share from OPEC in many Asian markets thanks to a pipeline to the Pacific and China.
The shift opened opportunities for rivals in the European markets, traditionally dominated by Russia, and Saudi Arabia has this year sold crude to Polish and Swedish refiners
“While the headlines focus on Russia and Saudi Arabia jostling for position on the continent, it is Iraq that has stolen a march on its regional rivals,” the International Energy Agency (IEA) said.
Since mid-2014, Iraq’s overall exports have risen by about 40% to above 3mn barrels per day (bpd) and deliveries of 1mn bpd to Europe during July and August raised Iraq’s market share to 17% – allowing it to overtake Saudi Arabia, according to the IEA.
Europe imports over 9mn bpd of crude from outside the region, and sour grades account for more than 6mn bpd.
Although Russian Urals continues to dominate with around 55%, Iraq has gained substantial market share since 2012 after sanctions were tightened on Iran, the IEA said.
However, Iran has already lined up buyers for its crude for when sanctions are lifted. The IEA cited market sources on Friday as saying Tehran would be able to sell at least an extra 400,000 bpd to buyers in Asia and Europe when the sanctions are lifted.
Customers would include refiners in Italy, Greece and Spain who prefer to use Iranian crude as their baseload feedstock.
“For this reason, producers are likely to grow still more competitive on pricing,” the IEA said.
Before Tehran was banned from selling oil to Europe in 2012, it was delivering about 1mn bpd of high-sulphur sour crude.
As a result of market share battles, the oil glut in Europe is aggravating further.
“Sour crude markets appear especially over supplied with discounts versus sweet grades widening. Europe is awash with competing sour crudes from the FSU and Middle East and US sour crudes remained depressed by refinery maintenance,” the IEA said.
