Iran is seeking to enter an oil price war with its rivals. Tehran ratcheted up its offense in the oil market by breaking a pricing tradition, signaling it is determined to win its market share at a time when rival producers are trying to forge a deal on freezing output, wrote Bloomberg.
State-run National Iranian Oil Co. announced that it will sell the Forozan Blend crude to Asia below the level offered by rival Saudi Aramco for Arab Medium in May. Iran will offer the price at $2.43 a barrel which is below the average of the Oman and Dubai benchmark grades and $0.3 lower than Saudi Aramco’s price for the similar Arab Medium variety. This is the third month the Persian Gulf state is giving the discount.
NIOC will also sell the Iranian Light grade to Asian customers at $0.60 below Middle East benchmark prices, a company official said. Further, the Iranian Heavy grade will be sold to Asia at a discount of $2.60 a barrel to the Oman-Dubai average, while the Soroosh variety’s price was set at $5.65 a barrel below Iranian Heavy, according to the official.
Imports of Iranian oil by Asian customers hit a two-year high in February of 1.28mb/d, according to Reuters‘ calculations. The Saudis are expected to be looking at the success the Iranians are having in winning back market share in key Asian markets, and will likely take the view that limiting their own output will merely allow Iran to continue boosting its exports.
While producers including Saudi Arabia, OPEC’s biggest member, and Russia are due to meet in Doha on April 17th to discuss a deal to freeze output in a step toward clearing a global glut, Iran’s strategy is to regain market share lost over the past few years due to sanctions over its nuclear program. The Persian Gulf state is expected to focus on pricing and boosting supply.
While the key battle for market share will take place in Asia, the world’s biggest oil-consuming region, some analysts add that there will be a “vigorous competition” between Iran and other Middle East producers for outlets in other regions such as the Mediterranean and Northwest Europe.