Kuwait refines oil pricing in battle for European customers - Sources
Gulf Opec member Kuwait has changed the way it prices oil for Europe, trading sources said, in a rare tactical move aimed at making its crude more competitive as the battle for customers between Opec and non-Opec rivals intensifies.
The European market, long dominated by Russian oil supplies, has been neglected by major Opec producers due to poor growth as they focused on expanding Asian markets.
But as Russia moved aggressively into Asian markets and with the growing global oil glut heating up the fight for customers, Opec members such as Saudi Arabia and Iraq ramped up sales to Europe, taking on former Russian customers such as Poland and Sweden.
Large sales from Iraq's Kurdistan into Europe have added to the competition over the past six months and now Kuwait - a usually little-noticed seller in Europe - is both increasing sales and making its crude more attractive.
A senior trading source familiar with the development said that "If we want to have a share in any market, we have to have competitive marketing. That's what we are doing we have a legitimate market share that we try to protect and develop."
Trading sources said that from late last year the state-run Kuwait Petroleum Corporation (KPC) began pricing its European exports against the dated Brent benchmark after years of following OPEC's heavyweight Saudi Arabia in pricing its oil against the Brent Weighted Average (BWAVE).
However, BWAVE is also used by Iran while Iraq is using dated Brent. Over the past year, because of the way they are calculated, barrels priced off dated Brent have on average been cheaper than those priced against BWAVE.
A second trading source said that "All you have to do is just to look at who the customers like from the point of view of pricing. It is pretty obvious that over the past year, they gravitated towards Iraqi and very cheap Kurdish oil."
Source : Reuters