A price war is brewing between top oil producers in the Middle East, and the U.S. may be at the heart of it.
State-run National Iranian Oil Co. reduced official prices for September sales to Asia across all grades, said a company official on Friday, who asked not to be identified because of internal policy. The Light crude pumped by OPEC’s third-largest producer will be sold at its cheapest level in 14 years versus a similar variety from rival group member Saudi Arabia, according to data compiled by Bloomberg.
The Persian Gulf state is slashing the relative cost of its exports versus OPEC’s No. 1 producer at a time when buyers in Asia — the world’s biggest oil consuming region — face mounting pressure from the U.S. to halt purchases from the Islamic Republic. The price of so-called medium-heavy sour grades — Iranian Heavy and Forozan Blend — were also cut against the similar Saudi varieties to the lowest since 2000, when Bloomberg began collating data.
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The price of Iranian oil, as well as the country’s ability to export its cargoes, has come under the spotlight after U.S. President Donald Trump’s withdrawal from an global accord reached in 2015 over Iranian’s nuclear ambitions. That has led to a decline in the Middle East nation’s currency, a rise in inflation and placed the country’s economy on the verge of a breakdown.
Among Asia’s top importers of Iranian oil and condensates is China, which has rejected a U.S. demand to cut purchases. Elsewhere, buyers in South Korea and Japan are still awaiting the outcome of earlier requests for waivers.
Lifters in the European Union remain determined to preserve the nuclear deal as it considers the consequences of abandoning it as “catastrophic.” India, the world’s fastest growing oil market and one of Iran’s biggest customers, has been preparing for alternative supplies and is buying more U.S. crude.
Meanwhile, Saudi Arabia was said to have offered extra crude volumes on top of its contractual supplies to some buyers in Asia, after the producer pledged to fill any potential supply gaps in the market.