Saudi Arabia has dominated the oil market since the discovery of oil reserves in the 1930s. But today the circumstances have changed in such a way that Saudi Arabia is now facing tough competition from Russia in the oil market.
In fact, due to the economic sanctions imposed by the western countries, Russia is exporting large quantities of oil to China and India at subsidized prices.
A report published in the news agency Bloomberg has also said that the way Russia is gaining ground in the Asian oil market. That is a direct alarm bell for Saudi Arabia. According to well-known oil industry analyst Paul Sankey, the entry of Russian oil in Asian markets is reducing Saudi oil prices.
Saudi Arabia has been monitoring short sellers involved in the oil market for the past few days and is warning them not to sell oil at low prices.
On Tuesday too, Saudi Arabia’s Energy Minister Abdulaziz bin Salman warned short sellers of economic pain. However, he did not say what action would be taken if a country sells oil at a low price. After this warning, a slight increase in the price of Saudi oil was also seen.
Paul Sanke also believes that short sellers are also one of the reasons for the low price of Saudi oil. But Saudi Arabia should focus more on Russia than these short-sellers.
Russia’s footprint in Asian oil market a threat to Saudi Arabia: experts
“Frankly, I don’t know why they (Saudi Arabia) are so worried about small speculators,” Sanke told Bloomberg. I mean, you can reduce your problem a bit by monitoring these short sellers. Can be seen as a solution for the time being. But the fundamental problem is in the entire oil market balance.”
He further said that the real issue is whether Saudi Arabia can stop Russia from selling oil to Asian countries? Because what Russia is doing is a threat to Saudi Arabia. Russia is exporting its oil to Asian countries at subsidized prices. Which is traditionally reducing the premium price of oil from Saudi Arabia, Asia’s leading oil exporting country.
Sanke added, “This deal is bigger than people are appreciating it in terms of market share and competition. While Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman have a good relationship. Now it’s not clear whether the relationship between the oil ministers of the two countries is better or not.”
Russia’s entry in the oil market shocks Saudi Arabia
The main reason for the competition between the two oil giants regarding oil exports is Russia’s entry into the Saudi oil market. Before the beginning of the Russo-Ukraine war, Russia mainly exported its oil to European countries. Wherein, Saudi Arabia mainly. In these Asian countries, Saudi Arabia mainly used to export oil to India and China.
But after the Russo-Ukraine war, economic sanctions were imposed on Russia. Due to this, Russia is not able to export oil to European countries. After this, Russia started exporting oil to Asian countries at subsidized prices to maintain the pace of its economy.
How Russia’s stature has increased in the oil market of Asian countries can also be gauged from the fact that before the Russia-Ukraine war, Russia’s contribution to India’s oil market was less than one percent. But today, leaving countries like Saudi Arabia, Iraq and UAE, India has become the number 1 oil exporting country. Apart from this, only last month Russia has decided to export oil to another Asian country Pakistan at subsidized prices.
According to the Reuters calculation report, in the month of April, more than 70 percent of the oil exported by Russia through sea routes was imported by India and about 20 percent by China. For the last seven consecutive months, Russia is the largest oil supplier to India.
Apart from this, there is little indication that Russia will reduce its dependence on Asia for the time being. Because recently Russian Deputy Prime Minister Alexander Novak has said that Russia can supply 40 percent of China’s energy needs in the coming days.
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