Veteran oil industry analyst Paul Sankey has sounded the alarm on the rising Russian oil exports to Asia and its threat to Saudi Arabia’s dominance in the global oil market.
In a recent interview with Bloomberg TV, Sankey pointed out that Saudi Arabia’s price premiums were being eroded by the increasing competition from Russian oil, making it a pressing concern for the oil-rich kingdom.
Sankey expressed skepticism towards Saudi Arabia’s claims that market short sellers were solely responsible for the underwhelming oil prices. Instead, he emphasised that the overall oil balance, particularly the challenge posed by Russia, should be the primary focus for the Saudis.
While squeezing speculators may provide short-term relief, the long-term problem lies in addressing the competition from Russia and maintaining market share, he argued.
“Frankly, I don’t know why they’re so obsessed with speculators. I mean, you can squeeze speculators on a short-term basis. But the real problem is the overall oil balance,” Sankey told Bloomberg TV on Wednesday.
The Quest For Asian Domination Begins
Focusing on Russia’s strategy, Sankey said that Russia has been redirecting its oil exports towards Asian markets, thereby cutting into the traditional long-term Saudi premium for selling oil to Asia. He emphasized that the impact of this competition between the two oil giants on market share and overall competition is far more significant than currently appreciated.
Sankey also pointed out that despite the seemingly good relations between Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, it is still being determined whether the same rapport extends to their respective oil ministers. This potential tension between the two oil giants raises concerns as they have previously coordinated production efforts.
Russia’s efforts to diversify its energy exports stem from the sanctions that have restricted its access to European markets. Consequently, Russia has sought alternative destinations for its oil exports, with China and India accounting for approximately 90 percent of its seaborne crude shipments.
Moreover, Russia’s Deputy Prime Minister, Alexander Novak, recently hinted at the possibility of supplying 40 percent of China’s energy needs, indicating a sustained reliance on the Asian market.
As the global oil landscape continues to evolve, Saudi Arabia faces a formidable challenge from Russia’s expanding presence in Asia. To maintain its position as a dominant player in the oil market, Sankey told Bloomberg TV that the kingdom must find effective strategies to compete with Russia’s growing influence.
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