Saudi Arabia is taking steps to protect its market share in Asia – its largest market for crude oil exports, according to a new report by Wood Mackenzie.
Saudi Arabia has been forced to act as other crude suppliers have been making steady inroads in to Asia in the last few years reducing Saudi Arabia’s market share, said the report.
If Saudi Arabia were to maintain its current crude oil export volume of 227mn tonnes (Mt) to Asia, by 2020, its market share will reduce from 23% to 21%.
More importantly, this would mean a lost market opportunity for Saudi Arabia from Asia’s 135Mt of incremental crude oil import potential by 2020.
Wood Mackenzie said Saudi Arabia is forced to take action by providing price discounts in order to keep prices competitive and retain their market share in Asia.
Sushant Gupta, head of Asia downstream research at Wood Mackenzie said: “Asia is the largest market for Saudi Arabia’s crude oil exports. Asia’s share of Saudi crude exports has risen from 60% in 2006 to approximately 65% in 2014.
“Clearly, it is important for Saudi Arabia to protect its market share in Asia. However, competition has intensified and Asia now has more options to source crude oil supply.”
Addressing who the competitors for Asia’s market share are, Mr Gupta stated: “Iraq has emerged as the largest competitor. Our analysis shows it has been most successful in increasing its share of Asian crude supply, with exports rising most by 30Mt from 2010 to 2014.
“This is followed by Russia, whose supply increased by 21Mt and then United Arab Emirates (UAE) by 20Mt during the same period. Other emerging competitors include Latin America (Colombia and Venezuela) and West Africa. Saudi Arabia only increased its export volumes to Asia by 12 Mt in comparison.”
“Furthermore, an increase in US tight oil production has altered the crude trade flows in the last four years. The US has increased its heavy crude imports from Canada backing off crude volumes from Latin America.
“Similarly, higher use of domestic tight oil resulted in the re-direction of West African crude supplies. As such, these suppliers have turned to Asia, providing more options for Asian refiners.”
