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Opec cuts prices in share fight
[DUBAI] Iraq, Kuwait and Iran joined Saudi Arabia in cutting their March crude prices for Asia, signaling the battle for a share of Opec's largest market is intensifying.
Iraq's Basrah Light crude will sell at US$4.10 a barrel below Middle East benchmarks, the deepest discount since at least Aug 2003, the Oil Marketing Co said Tuesday. National Iranian Oil Co said its official selling price for March Light crude sales will be a discount of US$2.10 a barrel, the widest since at least March 2000, according to a company official who asked not to be identified because of corporate policy. Kuwait Petroleum Corp said Wednesday its discount will be US$4.10, the biggest since Aug 2008.
The cuts come after Saudi Arabia, the largest crude exporter, reduced pricing to Asia last week to the lowest in at least 14 years. The Organization of Petroleum Exporting Countries left its members' output targets unchanged at a November meeting, choosing to compete for market share against US shale producers rather than support prices. Iraq is the second-biggest producer in Opec, Kuwait is third and Iran fourth.
"This is an effort by some producers to protect market share," Sarah Emerson, managing principal of ESAI Energy Inc, a consulting company in Wakefield, Massachusetts, said by phone on Tuesday. "It's really straightforward; cutting prices is how you keep your foot in the door."
Middle Eastern producers are increasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia. Oil prices have dropped about 45 per cent in the past six months as production from the US and OPEC surged.
The International Energy Agency said Tuesday that the US will contribute most to global growth in oil supplies through 2020 as Opec's attempts to defend its market share will hurt other suppliers including Russia more.
"If they go out and sell at a higher price, they won't sell much," John Sfakianakis, Middle East director at Ashmore Group Plc, a London-based investment manager, said in an interview in Dubai. "For the Saudis, it's market share at any cost. Saudi is the leader in this and the others have to follow the leader."