China has been one of the biggest oil battlegrounds in recent years, with producers clawing at its coveted market share.
Traditionally, Saudi Arabia had dominated the market, but its exports have plateaued over the last few years.
And this has opened a window for other producers to get in on the action.
“How have the Saudis fared? Not very well. Actually, quite miserably,” wrote Michael Tran, commodity strategist at RBC Capital Markets, in a recent report to clients.
Most notably, Russia has grabbed over 215,000 barrels a day of China’s increased imports of 630,000 barrels a day this year, according to data cited by Tran. In fact, the Saudis and the Russians have been neck and neck over the last few months for the lead in the Chinese market.
(Although it hasn’t been just the Russians: other producers such as Venezuela and Brazil have also scooped up some market share, too.)
But now, there’s been an interesting new development with Russia and Saudi Arabia agreeing at the G-20 summit in China to cooperate on oil and to create a “working group” to stabilise markets just weeks ahead of the informal oil talks to be held in Algiers, Algeria, on September 26-28.
And, as Tran argued in his note, that’s notable with respect to what’s happening with the Chinese market because:
“If Russia intends to coordinate action alongside OPEC as recently indicated, the key incremental swing threat to Saudi Arabia potentially losing more market share is Iran. Iran has made a meaningful push back into China over recent months, with its market share recently approaching highs near 10% after dipping to as low as 5% during the years plagued by sanctions.”
For a visual reference, here’s a chart of Chinese crude imports from Saudi Arabia, Russia, and Iran:
Notably, Saudi Arabia still has a big presence in another desirable market, India, where it’s held onto about one-fifth of the market share. However, Tran argues that Iran shouldn’t be underestimated here, either.
According to his data, Iran scooped up most of India’s growth and more over the last three months “by boxing out several key competitors such as Iraq, Nigeria, and Angola.” India has increased imports by about 160,000 barrels per day year-over-year in that time frame, while Iran has increased its notional exports to India by over 285,000 barrels per day.
By comparison, the Saudis only captured about 15% of what Iran got in the same time period.
In short, he wrote, “Iran is the one to watch heading into the informal OPEC talks later this month.”
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