In Oil & Companies News 01/09/2017
Gulf OPEC members Saudi Arabia and Kuwait are unlikely to follow Iraq in a shift in the way it prices its oil in Asia and will monitor Baghdad’s attempts to squeeze more dollars from its reform, industry sources said.
Last week, Iraq’s state-oil firm SOMO began consultations with traders on its plans to switch to the Dubai Mercantile Exchange (DME) for its Asian oil pricing from Platts’ quotes, which Baghdad and neighboring Middle Eastern producers Saudi Arabia, Kuwait and Iran have used for decades.
The switch by OPEC’s second-largest producer, aimed at boosting revenues from oil exports at a time of low prices, follows years of talks with the DME, which has also held consultations with Saudi oil giant Aramco, according to Gulf industry sources.
But Aramco is unlikely to switch from Platts any time soon.
“DME needs to show it’s a reliable price discovery exchange,” one industry source said. A second source said Aramco’s move to the DME was not on the cards for now.
Iraq’s move is pending consultations with its customers, industry sources said. It has asked customers for feedback on the plan by Thursday, and some refiners may push back against the proposal, the sources said.
If successful, the switch will take place in January 2018.
Platts, which dominates pricing of physical oil, is not expected to sit idle.
“Our pricing is well understood and widely accepted. We are confident that we can fend off competition,” said a Platts source who did not want to be named.
Traders who support the shift to DME – a joint-venture between the CME Group and the governments of Oman and Dubai – say it is easier to register and trade on the exchange than Platts which has stricter criteria.
Industry sources said Gulf OPEC member Kuwait was unlikely to change its Asian pricing before Riyadh makes any move.
Middle East oil producers have for decades referenced Saudi Arabia’s official crude prices when setting their own monthly crude selling prices.
Source: Reuters
