Top oil exporter Saudi Arabia faces a dilemma when setting its monthly export prices this week, as Iran ramps up crude shipments into an already oversupplied market.
Export prices set by state oil giant Saudi Aramco could offer a glimpse into whether the Organization of Petroleum Exporting Countries' kingpin will continue a strategy of keeping output high and defending market share even with global benchmark prices around $30 a barrel, Reuters reported.
Saudi Arabia's economy has suffered from low oil prices and the entry of new Iranian crude into the market will only intensify its economic problems.
Following the lifting of western sanctions against Iran on Jan. 16, Tehran has moved quickly to restore relations with buyers, ordering a rise in oil output by 500,000 barrels a day.
"We now really see Iranian crude starting to move and that should alert the Saudis," said one trader with a North Asian refiner, suggesting the kingdom may have to offer Asian refiners even more attractive prices to keep market share.
Saudi Arabia's official selling prices in the last two months have been seen as attractive relative to other Middle East producers, indicating the country is seeking to protect its market share.
"The Saudis have become quite cooperative," said another trader with an Asian refiner. "It seems easier to agree on operational issues, for example if we want to postpone or advance a cargo."
This month, Saudi Arabia is expected to make relatively modest changes to its prices, with a decrease seen for lighter grades and an increase seen for the heavier grades, a survey of five Asian refiners showed.
The traders mostly expected the price gap between lighter and heavier grades to narrow because of an increase in the value of fuel oil relative to lighter oil products like gasoil during January.
Saudi crude official selling prices are usually released around the fifth of each month and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million bpd of crude bound for Asia.
